1 year fixed about to expire - what next?

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billy-bob

Registered User
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When I originally got my mortgage the 1 year fixed option was the best (it wasn't the cheapest, but all pointers seemed to state that rates were about to rise, and I was happy to be paying a set amount each month).

That year is almost up and I received noticed from my brokers last week informing me of my options. I can get the std variable (no thanks), a host of fixed (1, 2, 3, 5, 10) or the tracker.

I've been "informed" again that rates are set to rise, and once again, I'm happy to pay a little extra and know that's all I be paying for the coming period. I assume that if I signup for a tracker or variable, I can't go back to fixed ever again (I could move providers, I guess, or threaten to).

Is signing up for, say 3 year fixed the dumbest thing I can do right now? If i don't take fixed now, and plumb for tracker and rates sky rocket, am I opening myself up to having to change providers or trying to convince my current providers to make certain concessions?

I got my mortgage through the Mortgage Store in Cork, but I'm not 100% convinced they're completely independant, so some solid advice would be appreciated
 
Do you really need to fix - i.e. would a rise in rates really put you under financial pressure? If not then you should go tracker assuming that the rate is competitive. Only fix if you really need to for cashflow reasons. Don't do so in an attempt to second guess the institutions, time the market (you got that wrong once already like many others) or save money.
 
Right, but if I "lock in" to a tracker, am I limiting my options in the future? I things go mad, can I revert to a fixed at any point without penalty (I would have thought not).

The diff between the fixed and the tracker per month is quite nominal at the moment, so I'm not too worried on that front.
 
billy-bob said:
Right, but if I "lock in" to a tracker, am I limiting my options in the future? I things go mad, can I revert to a fixed at any point without penalty (I would have thought not).

The diff between the fixed and the tracker per month is quite nominal at the moment, so I'm not too worried on that front.
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A tracker is variable so you would not be locked in, however if you wanted to switch from tracker to fixed if interest rates had risen then the fixed rate on offer at the time would not be the same as the fixed rate on offer now.
 
And as far as I know Permanent TSB are announcing a rise tomorrow in the fixed rates. Other will follow suit next week I'm sure.
 
billy-bob said:
Right, but if I "lock in" to a tracker, am I limiting my options in the future? I things go mad, can I revert to a fixed at any point without penalty (I would have thought not).
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You should be able to switch to fixed at a later date if you need to but obviously prevailing fixed rates may have changed at that stage (up or down - who knows - although note the previous post). It is the other way around really - with a fixed rate you are locking yourself in and limiting your options so you should only do this for good reasons (e.g. because possible rate increases would put you under pressure).

The diff between the fixed and the tracker per month is quite nominal at the moment, so I'm not too worried on that front.
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Forget about that - only fix if you need to. In the long run a competitive tracker will generally come out cheaper than fixing for various periods (other than possibly a one year discounted fixed rate).
 
At least one institution has already put their fixed rates up by 1/2 % on the 3 year rate and all others are likely to follow as term market rates have gone up significantly recently. Fixing for 3 years now essentially would mean paying about 1% approx over a good tracker. So given that rates will generally only rise in 1/4% increments there would have be to 4 rate rises relatively soon for it to be worth your while to fix for the 3 years. Anyway I'm rambling. The bottom line really is what Clubman has said if you can afford to stay variable (on a tracker) then do so. If you want some comfort you could always fix a portion of your mortgage that way you are getting the best (or worst) of both worlds.
 
The Mortgage Store is definitely not independent - they are the ICS! Three year money can be had at 3.49% (from ICS) which is give or take the cheapest at the moment. The general consensus is that rates are likely to rise in the New Year but, seeing as the ECB has been sitting on it's hands for well over two years (and pundits have been predicting increases for almost all this time) it's nigh on impossible to say when and by how much rates will increase. Lenders fund fixed rate money on the money markets, not - as some people think - based on what they can get away with. If you can afford the repayments at 3.49% but would find, say, 4% a struggle then you probably be best advised to fix or at least fix part of the mortgage and take the rest on a tracker rate to allow you to over pay.

Sarah

www.rea.ie
 
The economies of Europe for been far too flat over the past 2 years to justify or for them to cope with any increase rates, however things seem to be picking up and more importantly inflation concerns are rife. It is really the inflation issue that is driving the talk of rate rises. Granted oil was causing alot of this and it has dropped in price lately it still is relatively high and inflationary concerns continue. The thing about it is all the ECB has to do is talk about rate rises and market rates will go up, which can help to achieve their aim without raising rates, however they can only talk about rises for so long, at some point they have to either raise rates or stop talking about it because they'll lose credibility.
 
Sarah W said:
. If you can afford the repayments at 3.49% but would find, say, 4% a struggle then you probably be best advised to fix or at least fix part of the mortgage and take the rest on a tracker rate to allow you to over pay.
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Common sense will advise you not to borrow/buy if your budget is that squeezed
 
All PTSB fixed rates have risen WEF 17/11/05 - they will honour any offers already issued as long as they close before 16/12/05.

Sarah

www.rea.ie
 
1 year fixed 2.99%
2 year fixed 3.70%
3 year fixed 3.99%
5 year fixed 4.29%

All above are new business rates. The tracker and variable rates haven't moved.

Sarah

www.rea.ie
 
Sarah W said:
1 year fixed 2.99%
2 year fixed 3.70%
3 year fixed 3.99%
5 year fixed 4.29%

All above are new business rates. The tracker and variable rates haven't moved.
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Which rates are they quoting on their website - are these not the fixed rates or are we talking rates versus apr's or something - sorry im confused!

Fixed Interest Rates Gross Rate APR
1 Year Fixed New Business 2.55%
2 Year Fixed New Business 3.15%
3 Year Fixed New Business 3.49%
5 Year Fixed 3.79%
10 Year Fixed 4.39%

From PTSB website:
[broken link removed]
 
It seems that most economists are saying there will be a rise of at least 0.5% over the next 18 months....if one was to take this as a given, then this would raise my tracker with Ulster Bank from 2.95% to 3.45%.

Considering that Ulster Bank are offering a 2 year fixed rate of 3.29% and a 3 year fixed rate of 3.45% at the moment, it may be worth considering this option....all comes down your perceived level of risk.
 
maximus said:
if one was to take this as a given
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Aye - there's the rub though. They have been predicting rate increases for ages now and they have been proven wrong. Don't fix in an attempt to save money. Only do so if rate increases would cause you problems with meeting your repayments.
 
Clubman, thanks for your continued advice, but I still have a problem deciding between fixed and tracker.

Let's say the fixed rate over 2 years is 3.39% and the tracker is at 3.3%. The diff per month right now is about €11. Not a great amount. If the tracker rises less than .09% in the next 2 years, I'm still no worse off, really. If it rises by more, I'm sorted. It's hardly likely to fall? I know I'm trying to beat the market there, but all indications are that it's going to rise (and by more than .09%), but even if the indications are wrong, they're not going to be so wrong that the ECB rate drops. When's the last time this rate dropped?

So while my finances are not so bad that I can't afford even a 4.5% mortgage (or thereabouts) why take the chance? Knowing that I'll be paying €x per month for the next 2 years takes all the guesswork out of it, and I don't need to be adjusting my savings plan as the rate fluctuates.

I'm more worried about my options in 2 years time - whether the tracker rate or other fixed rates will still be available to me having taken out another fixed rate term.
 
By fixing you will most likely pay a premium over and above a competitive tracker for the peace of mind that fixed repayments bring. If you consider this peace of mind worth it then by all means fix. Don't do so in an attempt to time the markets and save money though. By the way the ECB rate has been 2.00% since June 2003. If I was in your position and could afford the impact on repayments that a rate hike of a few percent would involve then I would not fix. But each to his/her own...
 
ClubMan said:
If I was in your position and could afford the impact on repayments that a rate hike of a few percent would involve then I would not fix. But each to his/her own...
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Not to belabour a point (oops, too late :)), but why? A rate hike of a few percent would put the rate way above the offered fixed rate, so why would I put myself up to that? I know it may fall again in the future, but if it's still competitive in 2 years time, I can sign up for it then, if not, I can go for fixed again.

I know there's something fundamental I'm missing here, I just can't see it.
 
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