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mortgage interest rates in short term

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  • 13-12-2017 12:43pm
    #1
    tommythecat
    Registered Users Posts: 676 ✭✭✭


    Hey,

    What are peoples thoughts on where mortgage interest rates are going to be in the next couple of years?
    I have 2.95% LTV with AIB and I am seriously considering the 2.95% (current account discount) 10 year Fixed with KBC.
    I'm not sure I see rates coming down much further than 2.95%. My feeling is they will rise within the next two years but interested on others thoughts.
    My main bone of contention is that you can not overpay at all on this 10 year fixed unlike their other fixed rates so may try to do a 75% fixed and 25% variable and overpay the variable portion.
    I'd loved to hear peoples thoughts and if anyone has a crystal ball!!!

    Tommy

    4kwp South East facing PV System. 5.3kwh Weco battery. South Dublin City.



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    #2
    Paulw
    Moderators, Society & Culture Moderators Posts: 13,381 Mod ✭✭✭✭Paulw


    ECB have indicated that rates may rise in 2019.

    https://www.independent.ie/business/personal-finance/property-mortgages/how-irish-households-are-most-at-risk-in-europe-from-ecb-rate-hike-36403830.html

    Worth a read for you.


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    #3
    koheim
    Registered Users Posts: 156 ✭✭koheim


    Even if ECB rates rises, I would be surprised if the Irish Banks would mirror that. They stopped following ECB when rates went down compared the rest of Europe, so why would the follow ECB up?
    Irish Banks still charges 100% (double) more than the European average on Mortgage Interest rates, they are making a killing on the Irish consumer, surely there will be war if they dare to raise the rate to their consumers...


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    #4
    quadrifoglio verde
    Registered Users Posts: 3,670 ✭✭✭quadrifoglio verde


    2.95 fixed for ten years seems like a no brainer.
    If there's one thing I've learned about variable rate mortgages, its that the rate can go up and up, even when the ecb rate is on the floor. I certainly don't see them going down if the ecb rate rises.
    A guaranteed rate of 2.95% for the next 10 years is nice. You know what you'll need to pay today and in 5 years time. Makes for nice planning.

    Also worth knowing is that breaking a fixed rate has never been cheaper, should a better offer come up in the future
    https://www.askaboutmoney.com/threads/it-may-be-much-cheaper-than-you-think-to-break-out-of-a-fixed-rate-early.204442/


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    #5
    Browney7
    Registered Users Posts: 3,099 ✭✭✭Browney7


    Paulw wrote: »
    ECB have indicated that rates may rise in 2019.

    https://www.independent.ie/business/personal-finance/property-mortgages/how-irish-households-are-most-at-risk-in-europe-from-ecb-rate-hike-36403830.html

    Worth a read for you.

    Impossible to tell OP. Rates charged to consumers in other eurozone countries are far lower than here. Banks are making serious NIM (net interest margin) on new money but they've large tranches of impaired mortgages and trackers where they are making little to nothing (if not making losses). If house prices keep going up, it will continue to take the edge off some more of the negative equity and arrears problems that banks still have.

    If banks have to compete more aggressively, their margins on non tracker lending might get squeezed (on the other hand, pigs might fly before they "compete").

    My own view is that charged rates may come down by another 25bps by the end of next year for lower LTV loans and if the ECB increases rates, the banks may absorb the first quarter point rise before passing on subsequent rate rises.

    Short answer is that it's nothing more than a punt/shot in the dark regardless


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    #6
    iluvfatfrogs
    Registered Users Posts: 616 ✭✭✭iluvfatfrogs


    tommythecat wrote: »
    Hey,

    What are peoples thoughts on where mortgage interest rates are going to be in the next couple of years?
    I have 2.95% LTV with AIB and I am seriously considering the 2.95% (current account discount) 10 year Fixed with KBC.
    I'm not sure I see rates coming down much further than 2.95%. My feeling is they will rise within the next two years but interested on others thoughts.
    My main bone of contention is that you can not overpay at all on this 10 year fixed unlike their other fixed rates so may try to do a 75% fixed and 25% variable and overpay the variable portion.
    I'd loved to hear peoples thoughts and if anyone has a crystal ball!!!

    Tommy

    And you get €3,000 towards switching fees?


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    #7
    DubCount
    Registered Users Posts: 1,068 ✭✭✭DubCount


    tommythecat wrote: »
    Hey,

    What are peoples thoughts on where mortgage interest rates are going to be in the next couple of years?
    I have 2.95% LTV with AIB and I am seriously considering the 2.95% (current account discount) 10 year Fixed with KBC.
    I'm not sure I see rates coming down much further than 2.95%. My feeling is they will rise within the next two years but interested on others thoughts.
    My main bone of contention is that you can not overpay at all on this 10 year fixed unlike their other fixed rates so may try to do a 75% fixed and 25% variable and overpay the variable portion.
    I'd loved to hear peoples thoughts and if anyone has a crystal ball!!!

    Tommy

    I dont think interest rates will fall any time soon, so if I was offered a fixed rate at the same price as variable, I would take it. Watch out for costs (legal etc) on transferring from one bank to another. Also, watch that some banks calculate interest differently, so compare APR or repayments per €1000 in stead of headline interest rates. Maybe ask AIB to match the KBC offering.

    Banks in Ireland do charge more than other Eurozone countries. Thats because part of your interest payment is going to pay for losses they are making on other customers who are on loss-making tracker rates or in default/arrears. I dont think that is going to change any time soon.


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    #8
    tommythecat
    Registered Users Posts: 676 ✭✭✭tommythecat


    Thanks Guys. Some good food for thought. Yes I would get the 3k switching to KBC so that would cover the costs anyway. I think the only downside really is the lack of overpaying facilities on this particular product, which over ten years could be costly in terms of interest I could save.

    4kwp South East facing PV System. 5.3kwh Weco battery. South Dublin City.



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    #9
    Paddytheman
    Registered Users Posts: 271 ✭✭Paddytheman


    quadrifoglio verde wrote: »
    2.95 fixed for ten years seems like a no brainer.
    If there's one thing I've learned about variable rate mortgages, its that the rate can go up and up, even when the ecb rate is on the floor. I certainly don't see them going down if the ecb rate rises.
    A guaranteed rate of 2.95% for the next 10 years is nice. You know what you'll need to pay today and in 5 years time. Makes for nice planning.

    Also worth knowing is that breaking a fixed rate has never been cheaper, should a better offer come up in the future
    https://www.askaboutmoney.com/threads/it-may-be-much-cheaper-than-you-think-to-break-out-of-a-fixed-rate-early.204442/

    My broker actually got me approved with KBC and while we considered the 10yr fixed we decided it was actually a very long time. He advised us that the buy out clause was also "quite expensive"...


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    #10
    L1011
    Moderators, Business & Finance Moderators, Motoring & Transport Moderators, Society & Culture Moderators Posts: 67,854 Mod ✭✭✭✭L1011


    I wouldn't see Irish rates going down much further without a vast change in competition; that said I doubt they'd rise with ECB rates for a notch or two because they are already so high compared to other countries.

    The only valid reason not to take a 10 year fixed at that rate is how much it could cost to exit if you move before 10 years. You'd want to be very certain of staying in the house that long - kids/further kids definitely not happening, not even assumed not happening; unlikely to need to move for job reasons; certain the area is suitable and so on.

    I'd take it now in my own circumstances but it is definitely not for everyone.


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    #11
    derekbro
    Registered Users Posts: 152 ✭✭derekbro


    Also remember you can fix part of your mortgage, i'm considering going for the 10 yr fixed with KBC on half the mortgage, I'm already with them on 1 yr fixed at 2.9% at the moment.


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    #12
    B00MSTICK
    Registered Users Posts: 1,917 ✭✭✭B00MSTICK


    I'm thinking of going the hybrid route too - having the variable portion for overpayment is nice as well as the "safety net" of a fixed.

    If I can make an overpayment of ~1000 a month I can fix for 5 years and have the overpayment amount (60k = 1k x 12 x 5) on the variable rate.

    Was thinking of going with BOI but their variable is a bit nuts, 4.2% vs approx 3ish% from the majority of others.
    Over the course of my 5 year scenario this would mean monthly repayments (on the variable portion)of 272 vs 230 so €2520 in the difference over the 5 years.
    The cash back scheme at BOI would help with that but to me it seems like KBC are "winning" to some extent, at least in my back-of-envelope calculations.


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    #13
    tommythecat
    Registered Users Posts: 676 ✭✭✭tommythecat


    OP here again sorry to drag this up again but I have been looking into this again (never got round to it last time) and it seems like a no brainer now.
    The rate I can get with KBC with the current acc discount is 2.6% for 5 years fixed. This betters my 2.9% variable with AIB. So it’s the cheaper and the only downside I can see is the lack of overpayments but to be honest I don’t think we will be in a position to do much of that anyway in the next few years. We can always save a lump sum and throw it in at the end.
    I mean whatever about when rates are gonna rise I can’t see a much better offer on the table in the near future, do you?
    I qualify for the 3k switching fee too.
    Anyone think of any downsides?

    Thanks.

    4kwp South East facing PV System. 5.3kwh Weco battery. South Dublin City.



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    #14
    dudara
    Registered Users Posts: 33,519 ✭✭✭✭dudara


    We’ve chosen a 5 year fixed with KBC and we can overpay up to 10% of mortgage value over the 5 years. Do you have that option?


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    #15
    tommythecat
    Registered Users Posts: 676 ✭✭✭tommythecat


    dudara wrote: »
    We’ve chosen a 5 year fixed with KBC and we can overpay up to 10% of mortgage value over the 5 years. Do you have that option?

    Hi Dudara,

    Thanks for that info. I haven't spoken to them since the last time so I am not sure but I will certainly try to get that capability. That would be great. Thanks!

    4kwp South East facing PV System. 5.3kwh Weco battery. South Dublin City.



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    #16
    Claw Hammer
    Registered Users Posts: 6,163 ✭✭✭Claw Hammer


    koheim wrote: »
    Even if ECB rates rises, I would be surprised if the Irish Banks would mirror that. They stopped following ECB when rates went down compared the rest of Europe, so why would the follow ECB up?
    Irish Banks still charges 100% (double) more than the European average on Mortgage Interest rates, they are making a killing on the Irish consumer, surely there will be war if they dare to raise the rate to their consumers...

    The Irish banks have shown a marked capacity to screw their customers at every hands turn. They will not miss the opportunity to raise rates consequent upon an ECB rate rise. The Irish banks are still very weak financially and can only recover by way of super high charges


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    #17
    Samuel T. Cogley
    Registered Users Posts: 10,684 ✭✭✭✭Samuel T. Cogley


    dudara wrote: »
    We’ve chosen a 5 year fixed with KBC and we can overpay up to 10% of mortgage value over the 5 years. Do you have that option?


    +1 we took the 10 year and set our payments to overpay by the 10%. I'm pretty sure it's a standard Term of the KBC fixed rates.


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    #18
    myshirt
    Registered Users Posts: 5,245 ✭✭✭myshirt


    Claw Hammer wrote: »
    The Irish banks have shown.... They will not miss the opportunity to raise rates consequent upon an ECB rate rise.

    Agreed. PTSB are possibly the worst. AIB the nicest.
    Claw Hammer wrote: »
    The Irish banks are still very weak financially and can only recover by way of super high charges

    What? Please do explain.


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