Fixing for 10 years? Are we mad?!

Buying house2020 · 10-04-2019 4:54pm #1

Hi,

Considering fixing our mortgage for 10 years, looking for opinions/ advice

Stage of life we are at, we don't plan on overpaying our mortgage in the next 10 years, any spare money we have will be spent on our family and other areas of life.

We are very tempted to lock into the 10 year fixed rate, it guarantees what our repayments will be, are we mad to even consider fixing for 10 years?!

highgiant1985 · 10-04-2019 5:01pm

Buying house2020 wrote: »

Hi,

Considering fixing our mortgage for 10 years, looking for opinions/ advice

Stage of life we are at, we don't plan on overpaying our mortgage in the next 10 years, any spare money we have will be spent on our family and other areas of life.

We are very tempted to lock into the 10 year fixed rate, it guarantees what our repayments will be, are we mad to even consider fixing for 10 years?!

at a reasonable rate, its worth it for the peace of mind IMO.

averagejoe123 · 10-04-2019 5:01pm

How much is your house worth and how much is outstanding on your mortgage?

Browney7 · 10-04-2019 5:06pm

What bank and what rate options?

Abba987 · 10-04-2019 7:03pm

I don't know what your rates are but if your on tracker don't do it

Samuel T. Cogley · 10-04-2019 7:15pm

We fixed for ten years, the security of the payments not changing vs. a possible small reduction in rates was preferable to us. However it's difficult to answer your question without knowing what rate you're fixing at.

Sleeper12 · 10-04-2019 7:26pm

Locking in for 10 years is a great idea if you get a decent rate.

Buying house2020 · 10-04-2019 8:00pm

3.3% over 10 years

Not on tracker

Samuel T. Cogley · 10-04-2019 8:09pm

Seems a bit high.

Weltsmertz · 10-04-2019 8:51pm

That's too high. Would fix for 10 years at something like 2.9% if it was available but no way at 3.3%

Treviso · 10-04-2019 9:38pm

I presume 3.3% is the new AIB 10 year fixed rate reduced rate? If so, I would look at the 5 year fixed at 2.85%. Will give you the peace of mind you're looking for while not being locked in for so long. Once the 5 years pass, there may be an option to switch to a more favourable lower LTV rate depending on value of house

Big Wex fan · 10-04-2019 9:50pm

I was going to say - you don't know what's ahead of you in 5 yrs from now so your restricting your flexibility in the future but I remembered I was in a 4 year fixed rate on my first mortgage & moved after 3 years. They gave me the option of paying the penalty or stay on the higher fixed rate on the new mortgage. Banks are not gamblers so they think mortgages are going to be lower or equal to what they're offering in long term fixed rate. Of course they're not always right!

Wheety · 10-04-2019 9:55pm

I fixed for 5 years at 2.6%

I think 5 is the sweet spot for fixing.

Treviso · 10-04-2019 9:58pm

It does look like interest rates are going to down further, given this move by AIB. I expect in 3-6 months that their variable rate will drop to 2.8% or similar. But that is just speculating.

Irish times made a good point. In 2012 BOI offered a 10 year fixed at 6.15% - imagine being stuck in that rate now. That is why 5 years in the longest term to go with

ashes2014 · 10-04-2019 9:59pm

10 years is a long time. Sometimes its worth it for the security of knowing what you will be paying but not if your paying too much for it-I think 3.3% is a bit high for that.

hmmm · 10-04-2019 10:02pm

Very long term fixed rates are very popular outside Ireland, so we're only catching up. I was very happy to take out a 10 year fixed rate, and would have taken longer if I could. I have piece of mind knowing I could ignore everything happening with rates.

The idea of borrowing a large amount of money on a variable rate always sounded like madness to me. I'm not going to gamble just on the chance rates might drop a few tenths in the near future.

If you wanted to break out there would be a cost, but it wouldn't be huge.

PhoenixParker · 10-04-2019 10:15pm

We've fixed for 10 years at 2.99%. My thinking was:

1) the rules on breaking out of a fixed rate have been changed by EU law. The possible charges (and therefore my risk) are much lower.

2) I feel like between Brexit and Trump there's a lot of instability possible in the market. I didn't want to be coming off a 2-4 year fixed and get a big shock or potentially not be in a position to move my mortgage due to additional kids or income drop.

3) 2.99% is a pretty low rate. Yes it could drop, but realistically it's unlikely to go below 2% for a bit. Coupled with point 1, the possible downside is pretty low.

4) My current bank offered the rate so the effort, cost and paperwork were pretty much zero.

I don't think I'd fix at 3.3% but those are my circumstances. 3% was/is my mental cut off. Not sure why, it's not all that logical.

Browney7 · 10-04-2019 10:22pm

Assuming you've 20 years left on a 200k mortgage, if you fix with KBC for 5 years at 2.65%, your repayment would be 1074. After 5 years you'll have paid roughly 64.5k in payments and have 158.7k left on your mortgage after 5 years.

If you fix for ten years at 3.3%, at the 5 year point you'll have paid 68.4k in payments based on 1139 monthly (3900 more in total than the 5 year) and have 161k left on the mortgage. At the ten year point, you'd have 115.5k left.

If you then use the 3900 saving and apply to the balance at the five year point on the five year fixed, if a 5 year fixed rate of 4.3% was available, the repayment would then be 1168 (so 1750 more in years 6 to 10) and at the end of year 10 you'd have a balance of 113k.

So basically, if the five year fixed in five years time is over 1.6% higher than the rate currently available, you'd still be quids in.

Figures may not be fully correct and worth getting advice OP and might give you a steer in how to think about it

Buying house2020 · 10-04-2019 10:40pm

Yes the 5 year fixed rate is 2.85% which is very tempting.

With Brexit, trump etc. we'd be worried that when the 5 year year fixed is up that the world economy could be in a bad way (of course no one can predict and it's a gamble either way!). This is what makes fixing for 10 years at 3.3% appealing.

voluntary · 10-04-2019 10:43pm

Buying house2020 wrote: »

Yes the 5 year fixed rate is 2.85% which is very tempting.

With Brexit, trump etc. we'd be worried that when the 5 year year fixed is up that the world economy could be in a bad way (of course no one can predict and it's a gamble either way!). This is what makes fixing for 10 years at 3.3% appealing.

Be worry of good times not bad times. Interest rates will be kept extremely low in any sort of recession. It's usually the good times with high inflation periods when the rates sky rocket.

Sleeper12 · 10-04-2019 11:23pm

Treviso wrote:

Irish times made a good point. In 2012 BOI offered a 10 year fixed at 6.15% - imagine being stuck in that rate now. That is why 5 years in the longest term to go with

During the currency crisis in the 90s people fixed in a 15 or 20 percent. Banks were borrowing at an overnight rate of 75 percent. People thought rates could hit 30 percent or higher because banks were losing money on the overnight rate.

I disagree with 5 years being the longest term to fix. Even if rates edge lower in the short term they are expected to be higher in five years than now. It's all crystal ball gazing. Especially with Brexit. Brexit could drag the EU into a recession and rates could stay low. Likewise if inflation takes off in the EU then rates will jump. EU rates are at an all time low. They can't go lower.

antiskeptic · 10-04-2019 11:29pm

We're (historically speaking)something like 2 years late on our next recession. Recession means rate drop and a period thereafter where it takes time to come back up.

You may be locking in at peak rates.

voluntary · 10-04-2019 11:37pm

EU rates are very unlikely to go lower (although they technically could move negative) however Irish banks have a large space to lower their fixed rates. Banks across the eurozone often offer ECB rate (currently 0%) + 1.5% while here people seem happy when offered 2.85%.
I believe there's a good chance we'll see offers below 2% in the next six to twelve months.

ted1 · 11-04-2019 4:44am

Buying house2020 wrote: »

3.3% over 10 years

Not on tracker

A variable is 2.75, you’d be in a better position to take the variable and over pay the balance .58%

Approx 30 euro a month for every 100k over 25 years.

So if you have a 300k mortgage that’s 1080 off the capital every year. It’ll be a few years before the variable gies above 3.3

voluntary · 11-04-2019 7:53am

ted1 wrote: »

A variable is 2.75, you’d be in a better position to take the variable and over pay the balance .58%

Approx 30 euro a month for every 100k over 25 years.

So if you have a 300k mortgage that’s 1080 off the capital every year. It’ll be a few years before the variable gies above 3.3

This just proves how a relatively low % number can make a huge financial difference.

One correction, 0.58% interest difference on 300k loan makes 1740 euros savings in year one.

Buying house2020 · 12-04-2019 3:45pm

Or as a halfway mark, we could fix for 7 years at 3.15%, middle ground for percentage rates and time wise in case anything changed.

machalla · 12-04-2019 4:21pm

voluntary wrote: »

EU rates are very unlikely to go lower (although they technically could move negative) however Irish banks have a large space to lower their fixed rates. Banks across the eurozone often offer ECB rate (currently 0%) + 1.5% while here people seem happy when offered 2.85%.
I believe there's a good chance we'll see offers below 2% in the next six to twelve months.

Out of curiosity what makes you think the rates will drop so significantly in that time period?

The ECB are putting rate rises on hold but its likely they will resist any further cuts unless the economic situation takes a vicious downturn.

The potential impact of a bill in the dail whose outcome will likely be to cause rates to rise due to the inability to offload bad debt is a negative for interest rate cuts for a start.

If they ban cashback offers perhaps the rates may drop somewhat as they have to compete on the actual rates then but that's not a a guarantee either.

I would expect rates to either increase or stabilise at current levels over the next 1-3 years at a guess. But its not an overly educated guess so I'm curious as to your reasoning on this.

aloooof · 12-04-2019 5:11pm

voluntary wrote: »

This just proves how a relatively low % number can make a huge financial difference.

One correction, 0.58% interest difference on 300k loan makes 1740 euros savings in year one.

I don't think anyone who's done their sums will be surprised by this. A 0.58% reduction represents a significant portion of any mortgage interest rate offer available.

averagejoe123 · 12-04-2019 5:23pm

Buying house2020 wrote: »

Or as a halfway mark, we could fix for 7 years at 3.15%, middle ground for percentage rates and time wise in case anything changed.

Considering you can fix for 5 years at 2.6% with ulster bank I do not think the 7 year offering is appealing at all. If you give your outstanding mortgage and value of house it is easier to put real numbers behind this

Sleeper12 · 12-04-2019 7:07pm

Buying house2020 wrote:

Or as a halfway mark, we could fix for 7 years at 3.15%, middle ground for percentage rates and time wise in case anything changed.

It's not likely that interest rates will jump in the short term though Brexit may make a liar out of me. If you fix you are fixing for the long term possibility /probability that interest rates will increase. Its purely crystal ball gazing & anyone talking about interest rates in 4 to 5 years are purely guessing.

I've never fixed in my life but I still love the idea of fixed rates. It brings certainy and reliability to your life

voluntary · 12-04-2019 9:51pm

Sleeper12 wrote: »

It's not likely that interest rates will jump in the short term though Brexit may make a liar out of me. If you fix you are fixing for the long term possibility /probability that interest rates will increase. Its purely crystal ball gazing & anyone talking about interest rates in 4 to 5 years are purely guessing.

I've never fixed in my life but I still love the idea of fixed rates. It brings certainy and reliability to your life

Tracker rates may move higher in one scenario - when the ECB raises the rates because of growing inflation in the Eurozone.

Variable rates are more tricky as they are not linked to any index or external authority. Banks can set them as high as they wish so it's more difficult to predict what they will be in the near future.
In general they may increase because of two reasons. First is the same as with trackers, ECB increases the rates, local banks likely follow. Second reason would be when local banks get into financial trouble and need money. They can increase rates regardless of the ECB rates.

Fixing for 10 years? Are we mad?!

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