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How Long to Fix For?

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  • 03-01-2020 3:57pm
    #1
    paulisagayboy
    Registered Users Posts: 166 ✭✭


    Looking at Mortgage options atm

    With a 2 Yr Fixed it seems that the best I can do is BOI. 2.9% Rate but 2% cashback if only with them for 2 years. Would also get 2000 bonus interest as we have a mortgage saver account with them. Even with the 2.3% rate from Ulster, with the cashback, BOI is the best option.

    If I fix for 5 years, with Cashback offer, EBS is actually yhr best offer. (2.9% Fixed).

    With the best variable rate at the minute at around 3.15% (AIB) and most around 3.5%, why would I not fix for 5 years and then shop around again at the end of this time.

    I am Unlikely to come into a lump sum or want to pay back early.

    Also on a slight side note, in my old statements, I accidentally made one deposit to an Online Betting account (stupid I know, shows as PayPal *B365). Its €100 but is in complete isolation. Any chance that this will be an issue or will it slip through the net?


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    #2
    Q&A
    Registered Users Posts: 555 ✭✭✭Q&A


    I can't see a bank being to concerned about a one off betting payment.

    Trying to predict interest rates is a mugs game (but that didn't stop us trying). More important is can you afford to pay a higher rate. The more sensitive your finances are to changes in rates would suggest fixing for longer but if you've scope to absorb higher rates then you can think about playing the game.


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    #3
    Dolbhad
    Registered Users Posts: 782 ✭✭✭Dolbhad


    I don’t think you can say if it was a good call or and call to fix until the end of the fixed period. Most people seem to be fixing for between 3-5 years in the last 2-3 years. It seems before than people may have only fixed for 1-2 years. Rates are very competitive (by Ireland’s terrible standards) so I plan on fixing for 4 years with UB at 2.7%. They only do cashback of €1500 but We are getting a getting an exemption.

    I plan on remortgaging at the end of the fixed period as Ulster Bank (and KBC) have high variable rates you move to compared to AIB and BOI.


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    #4
    deisedevil
    Registered Users Posts: 3,252 ✭✭✭deisedevil


    I just fixed for 2 years with KBC. 2.25% interest and 3000 cashback.


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    #5
    Wesser
    Registered Users Posts: 1,813 ✭✭✭Wesser


    ulster bank 4 years 2.6%?


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    #6
    Dolbhad
    Registered Users Posts: 782 ✭✭✭Dolbhad


    I’m getting an exemption with Ulster Bank - apparently they like to charge abit more interest rate wise when your getting an exemption. In fairness they had disclosed all of this and the rate that would be offered if we took 3.5 times our salaries.

    But KBC I think is the cheapest on the market - but very high rate once you come off fixed rate so would need to switch or fix again if you can later on.


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    #7
    L-M
    Registered Users Posts: 23,694 ✭✭✭✭L-M


    I fixed for 5 years and I’m half regretting it. Honestly not sure why as I don’t plan on selling or anything and also you’re allowed pay off an extra 10% of the initial borrowing over the 5 years (ie. 2% per year etc) with KBC.

    Someone said something quite logical to me, if some banks are willing to fix for 5 and 10 years, there’s only one way they see interest rates going.


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    #8
    StupidLikeAFox
    Registered Users Posts: 7,699 ✭✭✭StupidLikeAFox


    AIB are also doing a 5 year fixed rate at 2.5% if your house has a BER rating of B3 or more.


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    #9
    Dolbhad
    Registered Users Posts: 782 ✭✭✭Dolbhad


    Also worth checking out the breakage fee if you did fix for a longer period in case something happened. Ulster Bank/KBC seem to have a higher breakage fee compared to AIB/BOI.


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    #10
    Q&A
    Registered Users Posts: 555 ✭✭✭Q&A


    Dolbhad wrote: »
    Also worth checking out the breakage fee if you did fix for a longer period in case something happened. Ulster Bank/KBC seem to have a higher breakage fee compared to AIB/BOI.
    Dolbhad wrote: »
    Also worth checking out the breakage fee if you did fix for a longer period in case something happened. Ulster Bank/KBC seem to have a higher breakage fee compared to AIB/BOI.

    Technically all banks must calculate the break free the same way and you can't work out unless you know what market rates are on the day you fixed and the day you break. Break fees are likely to change by the day and reflect things like interbank rates.


    Large break fees are more to do with people fixing when banks funding costs were relatively higher and trying to break out when funding costs had fallen. My guess is you hear more about Ulster and KBC because they were offering better fixed rates (for longer fixed periods) at the period just as costs declined, so had more of the market.

    On top of all that I know Ulster cap break fees at max 6 months interest


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    #11
    Dolbhad
    Registered Users Posts: 782 ✭✭✭Dolbhad


    Q&A wrote: »
    Technically all banks must calculate the break free the same way and you can't work out unless you know what market rates are on the day you fixed and the day you break. Break fees are likely to change by the day and reflect things like interbank rates.


    Large break fees are more to do with people fixing when banks funding costs were relatively higher and trying to break out when funding costs had fallen. My guess is you hear more about Ulster and KBC because they were offering better fixed rates (for longer fixed periods) at the period just as costs declined, so had more of the market.

    On top of all that I know Ulster cap break fees at max 6 months interest

    Ulster Bank have in their loan offer the breakage fee. Basically a big calculation or a set fee they state (based on your mortgage) and you will be charged whatever is less. But least you know what it is in case down the line you wanted to break it.

    A 7-10 year fix rate that would be a massive breakage fee but I don’t think people are fixing for that length of time cause that is a long time to be tied in to a bank.

    KBC and Ulster Bank do seem to have high variable rates you are moved (compared to AIB/BOI) to after fixed rate. But as you said, it’s how they can offer such good fixed rates. I presume they hope people won’t bother with the hassle of remortgaging. Also KBC require you to move your accounts to them and have your wages paid into a KBC account to get the lowest rate.


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    #12
    Grumpypants
    Registered Users Posts: 7,768 ✭✭✭Grumpypants


    paulisagayboy wrote: »
    Looking at Mortgage options atm

    With a 2 Yr Fixed it seems that the best I can do is BOI. 2.9% Rate but 2% cashback if only with them for 2 years. Would also get 2000 bonus interest as we have a mortgage saver account with them. Even with the 2.3% rate from Ulster, with the cashback, BOI is the best option.

    If I fix for 5 years, with Cashback offer, EBS is actually yhr best offer. (2.9% Fixed).

    With the best variable rate at the minute at around 3.15% (AIB) and most around 3.5%, why would I not fix for 5 years and then shop around again at the end of this time.

    I am Unlikely to come into a lump sum or want to pay back early.

    Also on a slight side note, in my old statements, I accidentally made one deposit to an Online Betting account (stupid I know, shows as PayPal *B365). Its €100 but is in complete isolation. Any chance that this will be an issue or will it slip through the net?

    The betting thing, they usually look at 6 months of statements. When was the deposit made? Most likely by the time you decide and get to the process it will be outside this window.

    As for fixing or variable, i just go for the lowest interest right now (I fixed last year for 4 years at 2.6%).

    You will drive yourself nuts trying to predict the market. I fixed and put the surplus each month into savings. If you are buying a house it is very likely you will find something that needs fixing or doing up in the first 3 years so it is better you have the cash to hand rather than using a credit card or small loan.


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    #13
    Q&A
    Registered Users Posts: 555 ✭✭✭Q&A


    Dolbhad wrote: »
    Ulster Bank have in their loan offer the breakage fee. Basically a big calculation or a set fee they state (based on your mortgage) and you will be charged whatever is less. But least you know what it is in case down the line you wanted to break it.

    A 7-10 year fix rate that would be a massive breakage fee but I don’t think people are fixing for that length of time cause that is a long time to be tied in to a bank.

    They have a worked example but it's only an example. In the past that could charge what they liked. Now because of the EU mortgage directive all banks are required to link any break free back to how their costs have changed.

    A 7-10 fixed rate will only have a massive break fee if 7-10 year swap rates nose dive compared to the day you fixed.


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    #14
    Dolbhad
    Registered Users Posts: 782 ✭✭✭Dolbhad


    Q&A wrote: »
    They have a worked example but it's only an example. In the past that could charge what they liked. Now because of the EU mortgage directive all banks are required to link any break free back to how their costs have changed.

    A 7-10 fixed rate will only have a massive break fee if 7-10 year swap rates nose dive compared to the day you fixed.

    Mine had an exact amount - it was a special condition in the loan offer rather than in the general conditions (which do give examples). It had a calculation and said it would be based on that (which factors in when the fixed rate is broke etc so that’s unknown until the time you break it) or the figure listed, whatever would be lower at the time it fixed. But worse case scenario I worked on the basis of the figure given (which was around 3.5k which is a high fee to break).

    However I’ve only seen that in Ulster Bank’s loan offers. Other banks loan offer tend to be vague and do give the examples.

    A few months back a colleague of mine who has their mortgage with BOI said it was fixed and had a year left on the fixed rate. They looked into remortgaging so rang BOI about the breakage fee. Said someone would ring them back. Got a call from another department who said it would only be a few hundred euro to break but offered a .1% reduction in the fixed rate to say which my colleague did. Obviously a small breakage fee like that wouldn’t stop you switching.


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    #15
    Q&A
    Registered Users Posts: 555 ✭✭✭Q&A


    Dolbhad wrote: »
    Mine had an exact amount - it was a special condition in the loan offer rather than in the general conditions (which do give examples). It had a calculation and said it would be based on that (which factors in when the fixed rate is broke etc so that’s unknown until the time you break it) or the figure listed, whatever would be lower at the time it fixed. But worse case scenario I worked on the basis of the figure given (which was around 3.5k which is a high fee to break).

    However I’ve only seen that in Ulster Bank’s loan offers. Other banks loan offer tend to be vague and do give the examples.

    A few months back a colleague of mine who has their mortgage with BOI said it was fixed and had a year left on the fixed rate. They looked into remortgaging so rang BOI about the breakage fee. Said someone would ring them back. Got a call from another department who said it would only be a few hundred euro to break but offered a .1% reduction in the fixed rate to say which my colleague did. Obviously a small breakage fee like that wouldn’t stop you switching.

    Your assessment makes senses in your case. The most expensive it will be for you is the 6 month interest payment (3.5k).

    But going back to the original point I was trying to make. You can't make a comparison between these two cases. You don't know what the actual Ulster break cost was to compare to the actual BOI cost. Even then it's only a fair comparison of your mortgages were identical (start dates, fixation, break date etc).


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