2016 Variable vs Fixed - which way are you leaning?

Sleepy · 16-06-2016 09:41AM #1

I know none of us have a crystal ball but I'm curious to see where people's sentiments are on Fixed v Variable at present?

On one hand, European Central Bank rates seem unlikely to go any lower since to do so would bring them into negative territory. On the other, there's noise being made by government ministers about trying to get the banks to reduce their standard variable rates.

Using the Ulster Bank standard rates for First Time Buyers for a 29 year term as that's the situation we're currently in but I've adjusted the amounts to reflect a (fairly standard?) 250k house purchase with a LTV of 88.8% which meets the minimum Central Bank deposit criteria:

Mortgage Type|Initial Rate|Monthly Payment
Flexible Variable|4.3%|€1,117.29
3 Year Fixed|3.65%|€1,034.92
5 Year Fixed|3.75%|€1,047.38
7 Year Fixed|3.99%|€1,077.59

So what are we thinking Boards.ie? Fix or go Variable?

JustAThought · 16-06-2016 09:51AM

My variable is less than 1% and the difference for me between 4% and what I would pay on a fixed rate is close to e600 monthly extra.

What I didn't know is that different banks have different rates for their variables ( not fixed - variable) & that these also change depending on when & from whom you are buying your mortgage. They never tell you that !

Also many people with variables have a very different LTB value as their rates & loans were taken out before the punishing new rules so this gives a very biased & unrealistic picture for random lookers thinking of changing ! Just in case!!

It pays to shop & ask a lot of questions. Suggesting the norm for a variable is at 4.3% is misleading & a little bit of summer madness!

wench · 16-06-2016 10:04AM

Variable at a bank with better rates!

16-06-2016 10:05AM

Variable without a doubt I don't even look at the fixed rates, particularly as I would intend on overpaying the mortgage which can't be done on fixed. The rate I'm looking at with KBC on variable is as good as any of the fixed rates too. The variable your getting at ulsterbank is nearly 1% more than KBC's.

That being said I know its not as simple as that and that not all banks give approval to everyone etc, I know someone who just had to go with a highish interest rate as they are the only bank that would lend to him.

wench · 16-06-2016 10:14AM

Jaxton Faithful Windbag wrote: »

The rate I'm looking at with KBC on variable is as good as any of the fixed rates too. The variable your getting at ulsterbank is nearly 1% more than KBC's.

Be wary of KBC's rates.
They are very attractive for new customers, but once you are in, they won't pass on any rate reductions to existing customers.

http://www.boards.ie/ttfthread/2057604636

koheim · 16-06-2016 11:08AM

I am with BOI and our variable was 4.4% I signed up to a 3 year fixed of 3.6% last year. It reduced our monthly repayment by 110 Euro. I do not trust BOI to do anything significant with variable rates and they will continue to hold customers to ransom.
In 3 years time I will switch mortgage provider and variable interest should then hopefully be max 2.5% (in line with rest of Europe. Credit can only get cheaper in Ireland!

16-06-2016 11:09AM

wench wrote: »

Be wary of KBC's rates.
They are very attractive for new customers, but once you are in, they won't pass on any rate reductions to existing customers.

http://www.boards.ie/ttfthread/2057604636

Most other banks rates are way higher though. So even if another bank you go with reduces rates they will only be getting down to KBCs current rates

In general though at the moment I think who ever gives you the mortgage is the person to go with rather than who has the best rate, I just tried for the bank with the lowest rate and they have given me approval in principal had they not (or they subsequently don't give full approval which is unlikely at this stage) I will try other banks with higher rates. I know other people who didn't even look at rates they just went with who would give them a mortgage as they were getting refused by most.

iainBB · 16-06-2016 11:11AM

Go Variable

we are on 3.3% Var.

JustAThought · 16-06-2016 11:16AM

Jaxton Faithful Windbag wrote: »

Variable without a doubt I don't even look at the fixed rates, particularly as I would intend on overpaying the mortgage which can't be done on fixed.

Just to mention that unless you are fixing your mortgage for the entire 20/25 years which I think is unusual, you shoukd be able to pay off either with lump sum or increased repayments. To break a fixed term contract there are usually prohibitive penalties but within a 7-break - refix 7 year cycle ( or other variations) there is a contract gap where you can make changes/lump sum-overpayments etc I'd hate to see someone overpay e30- 50,000 or so because they made assumptions or didn't check away from urban mortgage legend...

16-06-2016 11:18AM

JustAThought wrote: »

Just to mention that unless you are fixing your mortgage for the entire 20/25 years which I think is unusual, you shoukd be able to pay off either with lump sum or increased repayments. To break a fixed term contract there are usually prohibitive penalties but within a 7-break - refix 7 year cycle ( or other variations) there is a contract gap where you can make changes/lump sum-overpayments etc

Yeah that's also true of course, I just don't like the idea of fixed rates. I'd be planning to go for the longest mortgage they will offer (thus the lowest monthly repayment) and then overpay this every month but then if needs be drop back to the minimum if there is an expensive few months happening etc.

Sleepy · 16-06-2016 11:41AM

I suppose for me, the question is whether that variable rate is likely to drop by .65% inside the next three years. I know Michael Noonan is keen to get rates reduced but with ECB rates being so low is there much room for that? And how likely is Europe to see some growth leading to interest rate rises in the next three years...

PhoenixParker · 16-06-2016 12:04PM

We're going with variable. Didn't seem to be any benefit to fixing right now, the rates we were offered were no lower then variable.

Banks are gradually inching down their rates, so the hope would be to overpay down to 80% LTV fairly quickly and at that point remortgage and take advantage of a lower rate. Whether that'll be fixed or variable will depend on what's happening at the time.

digiman · 16-06-2016 10:09PM

I took a 1 year fixed with BOI at their 3.4% rate and also got the 2% cashback so its an affective rate of 2.96% for the first year. I will assess the market again in 10 months time and see how things are.

I was very close to going with the UB 3.2% variable rate but the 2% cashback with BOI was just to tempting.

Michael D Not Higgins · 17-06-2016 07:21AM

digiman wrote: »

I took a 1 year fixed with BOI at their 3.4% rate and also got the 2% cashback so its an affective rate of 2.96% for the first year. I will assess the market again in 10 months time and see how things are.

I was very close to going with the UB 3.2% variable rate but the 2% cashback with BOI was just to tempting.

Keep in mind if you switch your mortgage away from BOI in the first 5 years you have to repay that 2%.

mickoneill31 · 17-06-2016 08:19AM

Jaxton Faithful Windbag wrote: »

Most other banks rates are way higher though. So even if another bank you go with reduces rates they will only be getting down to KBCs current rates

That was true last year. Now customers who took a mortgage with them last year are sitting on rates of about 3.69%.

Dunno about them being way cheaper either. I'm switching to another bank and getting 3.2% variable. I'm happy enough that if the rates go down, so far the bank I'm moving too have a history of passing them on. It's not guaranteed obviously but the only bank that seems to stick rates to existing customers is KBC and I'd imagine that switching is speeding up because of it.

For the OPs question I'd go variable. There's a new lender meant to be coming in if the central bank ever approve them. That'll put pressure on the rates to go one way and there's room for them to go down a bit more.

morrga · 17-06-2016 01:49PM

If the current Central Bank of Europe rates are practically 0% then wouldnt it make sense to lock into a fixed period of 5 to 7 years on the basis of the following.

Variable rates are unlikely to go much lower even with government intervention. Assuming banks do bow to external pressure the most they will knock off is surely no more than 0.50%.

Assuming on a cyclical basis, that the eurozone is bound to head into a period of growth and prosperity, this will fuel interest rate rises to encourage savings etc, which will in turn lead to banks passing this quickly onto consumers leaving variable rates to grow beyond the current variable rate levels thus making a long term fixed rate look much more attractive.

68 lost souls · 17-06-2016 03:21PM

morrga wrote: »

If the current Central Bank of Europe rates are practically 0% then wouldnt it make sense to lock into a fixed period of 5 to 7 years on the basis of the following.

Variable rates are unlikely to go much lower even with government intervention. Assuming banks do bow to external pressure the most they will knock off is surely no more than 0.50%.

Assuming on a cyclical basis, that the eurozone is bound to head into a period of growth and prosperity, this will fuel interest rate rises to encourage savings etc, which will in turn lead to banks passing this quickly onto consumers leaving variable rates to grow beyond the current variable rate levels thus making a long term fixed rate look much more attractive.

This is my thinking. Or if possible do a split mortgage and fix the majority but keep say 50k as variable?

digiman · 18-06-2016 09:53PM

Michael D Not Higgins wrote: »

Keep in mind if you switch your mortgage away from BOI in the first 5 years you have to repay that 2%.

Indeed, however you would pay back pro rata so not the full 2%, e.g. if you switched after 3 years you would have to pay back 0.8% rather than the 2%. I also wouldn't be surprised if other banks buy people out of these in an attempt to get them to switch.

ted1 · 18-06-2016 09:55PM

Sleepy wrote: »

I know none of us have a crystal ball but I'm curious to see where people's sentiments are on Fixed v Variable at present?

On one hand, European Central Bank rates seem unlikely to go any lower since to do so would bring them into negative territory. On the other, there's noise being made by government ministers about trying to get the banks to reduce their standard variable rates.

Using the Ulster Bank standard rates for First Time Buyers for a 29 year term as that's the situation we're currently in but I've adjusted the amounts to reflect a (fairly standard?) 250k house purchase with a LTV of 88.8% which meets the minimum Central Bank deposit criteria:

Mortgage Type|Initial Rate|Monthly Payment
Flexible Variable|4.3%|€1,117.29
3 Year Fixed|3.65%|€1,034.92
5 Year Fixed|3.75%|€1,047.38
7 Year Fixed|3.99%|€1,077.59

So what are we thinking Boards.ie? Fix or go Variable?

Go with a different lender like AIB or frank will be launching shortly . Much lower APR

Michael D Not Higgins · 18-06-2016 10:03PM

digiman wrote: »

Indeed, however you would pay back pro rata so not the full 2%, e.g. if you switched after 3 years you would have to pay back 0.8% rather than the 2%. I also wouldn't be surprised if other banks buy people out of these in an attempt to get them to switch.

Do you have a link for that? Everything I've read says it's the full amount during the 5 years.

ted1 · 18-06-2016 10:18PM

digiman wrote: »

Indeed, however you would pay back pro rata so not the full 2%, e.g. if you switched after 3 years you would have to pay back 0.8% rather than the 2%. I also wouldn't be surprised if other banks buy people out of these in an attempt to get them to switch.

You'll also have solicitor costs, and valuation costs when switching.

SeanPuddin_ · 18-06-2016 10:38PM

Worth repeating:

Check what rates will be available to you after fixed rate period. In a lot of cases the discounted variable rates are available only to new customers. Technically leaving a fixed term contract you are not a new customer anymore.

19-06-2016 02:36AM

ted1 wrote: »

Go with a different lender like AIB or frank will be launching shortly . Much lower APR

If he is about to draw down his mortgage for the place he wants to buy it hardly makes sense to begin a new mortgage application with a another bank. No chance he will get the house he is about to buy if he tries for a mortgage from another bank. Could be weeks or months before he gets approval if the other bank even give it.

ted1 · 19-06-2016 09:31AM

Jaxton Faithful Windbag wrote: »

If he is about to draw down his mortgage for the place he wants to buy it hardly makes sense to begin a new mortgage application with a another bank. No chance he will get the house he is about to buy if he tries for a mortgage from another bank. Could be weeks or months before he gets approval if the other bank even give it.

He asked what is he better off doing and out up some of the highest rates on the market.

19-06-2016 10:05AM

ted1 wrote: »

He asked what is he better off doing and out up some of the highest rates on the market.

He asked if he was better off going fixed or variable with the bank he is about to draw down with.

newacc2015 · 19-06-2016 01:50PM

No one has mentioned that there is new company seeking a banking license to give out mortgages in Q3 of this year. They are called Frank Money. They are borrowing money from pensions to give out mortgages to Irish consumers. They are expecting to be very competitive. I can see why as they wont have to subsidise a ton of trackers on their books like AIB.

I say Frank Money will be a game changer. Irish banks still some have of the most profitable mortgages in Europe by far. They can borrow money at some of the lowest rates ie Irish savers are receiving the lowest interest rates in Europe. While new mortgages in Ireland have some of the highest rates in Europe. Even customers in significantly higher risk countries in Eastern Europe have mortgages that have lower margins

mickoneill31 · 19-06-2016 01:58PM

newacc2015 wrote: »

No one has mentioned that there is new company seeking a banking license to give out mortgages in Q3 of this year. They are called Frank Money. They are borrowing money from pensions to give out mortgages to Irish consumers. They are expecting to be very competitive. I can see why as they wont have to subsidise a ton of trackers on their books like AIB.

I say Frank Money will be a game changer. Irish banks still some have of the most profitable mortgages in Europe by far. They can borrow money at some of the lowest rates ie Irish savers are receiving the lowest interest rates in Europe. While new mortgages in Ireland have some of the highest rates in Europe. Even customers in significantly higher risk countries in Eastern Europe have mortgages that have lower margins

I did in post 15.
I originally heard they were hoping to take applications in Match, now its Q3. The central bank seem to be sitting on the application and our politicians don't seem too bothered.

ted1 · 19-06-2016 02:21PM

newacc2015 wrote: »

No one has mentioned that there is new company seeking a banking license to give out mortgages in Q3 of this year. They are called Frank Money. They are borrowing money from pensions to give out mortgages to Irish consumers. They are expecting to be very competitive. I can see why as they wont have to subsidise a ton of trackers on their books like AIB.

I say Frank Money will be a game changer. Irish banks still some have of the most profitable mortgages in Europe by far. They can borrow money at some of the lowest rates ie Irish savers are receiving the lowest interest rates in Europe. While new mortgages in Ireland have some of the highest rates in Europe. Even customers in significantly higher risk countries in Eastern Europe have mortgages that have lower margins

You might want to read back a bit. I mentioned frank launching shortly

68 lost souls · 19-06-2016 02:32PM

ted1 wrote: »

Go with a different lender like AIB or frank will be launching shortly . Much lower APR

Hadn't heard about Frank before, thanks. Registered interest on their site.

drunkmonkey · 19-06-2016 11:27PM

Will AIB accept a re-valuation from their nominated valuer, would like to get the LTV under 50%.

2016 Variable vs Fixed - which way are you leaning?

Which mortgage would you opt for? 68 votes

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