Coming off fixed rate - Is there anything at all I can do?

[Calcutron]

Hi All,

Wondering if you can give me some advice about what to do.
I took out a new mortgage for a 2 bed apartment (my PPR) in Dublin 9 in December 2006. The apartment cost €317k and my mortgage was for €292k.
I was on a fixed rate of 4.3%.

Now the problem is that the interest rate I am entitled to when I come off the fixed rate in December seems to be 6.7%
This adds an extra €350 a month to my repayments. Currently I pay €1213 after TRS and now I'll be looking at €1563 (according to Karl Jeacle's calculator).
Unfortunately as I am probably in negative equity it means I have little flexibility to change to a more competitive lender and get a better rate.

Now - this is where I need your advice. My circumstances are that I am a 31 year old single female earning €80k per year. I am in a very senior position in my company and certainly have great earning potential in the years ahead. I have no other outstanding debt (except for €200 on my credit card) and I save €1,100 into high interest accounts each month.

Can I use my circumstances to sway the bank to give me a more lenient rate? Do I really have a case? The CFO of my company has offered to write a letter or even meet the bank in question with me if necessary. In your experience would this make any difference? I really want to do whatever it might take to minimise the amount of interest I have to pay. I feel that the bank in question in particular have been very harsh in their rate increases this year.

I'd love some advice or to hear any of your experiences.
Thanks !
C.

 

[LDFerguson]

In the current climate, I wouldn't be terribly optimistic of the bank offering you a better rate, although there's certainly no harm in asking.

Another idea might be to divert the €1,100 regular savings into extra capital repayments on your mortgage to get yourself out of negative equity and into a situation where you can eventually shop around for a more competitive mortgage.

 

[Calcutron]

Thanks for your reply !

Yes I fear that might be the case. Although I was kind of hoping they'd think I was a good prospect. Even if I could get them from the 6.7% (Its frighteningly like a sub prime rate of a couple of years ago) down to their standard 6.3% I would be delighted.
My plan is to go in and meet them face to face in my serious business mode () and with all the facts and see can I appeal to them.

The €1,100 higher payment is an option indeed and one that I've thought about for sure. I just figure that in the current climate having cash available to me is crucial. I have currently only got savings of about €10k. I want to bring this up closer to €25k before I start thinking about higher capital repayments on the mortgage. Maybe this isn't financially the best option, but its certainly the one that lets me sleep easier at night for the moment.

Do you reckon it'd be easy enough to get the bank to agree to a face to face meeting?

C.

 

[LDFerguson]

Helps if you have leverage of some sort. Do you bank with them? Does your employer bank with them?

 

[Calcutron]

Yes - I am very lucky, my company banks with this bank & I would imagine we are one of their important business clients with millions coming through every year.

God, it'd be great if that'd work in my favour....
Do you really think it might?

In terms of when to meet them - if I come off the fixed rate on December 15th, should I meet them in October, or is that too soon?

C.

 

[Sunny]

You could fix for 2 years for 6.3% if you happy to forego the flexibility that tracker mortgages allow you

 

[rmelly]

Yes - I am very lucky, my company banks with this bank & I would imagine we are one of their important business clients with millions coming through every year.

God, it'd be great if that'd work in my favour....
Do you really think it might?

I would be surprised if a threat (however worded) to by employer to move business swayed them - I'd be even more surprised if your employer was willing to co-operate as it would not really be in their interest - there must be reasons they bank with this bank to start with...

I suspect the bank would dismiss this out of hand as a bluff. Actually just thinking, if you are in negative equity they may be happy for you to move (assuming another mortgage provider will take you on).

 

[Calcutron]

Ah no - I don't think we'd go in all guns blazing like that - that wasn't the idea. It wouldn't be a threat at all. Of course I wouldn't ask my employer (and nor would they agree) to jeopardise their relationship with the bank in any way.

It just might give my appeal more gravitas to have them on side....

 

[rmelly]

Ah no - I don't think we'd go in all guns blazing like that - that wasn't the idea. It wouldn't be a threat at all. Of course I wouldn't ask my employer (and nor would they agree) to jeopardise their relationship with the bank in any way.

It just might give my appeal more gravitas to have them on side....

Sorry, what I meant was that any reference to your employer, however it is worded may be interpreted as a veiled threat particularly if you mention being senior / decision maker. That's how I personally would see it, maybe that's just me? I think that's what LDFerguson meant be leverage...

They may give a goodwill gesture, they may not, I suppose it's worth a try.

I think his original suggestion is probably your best bet.

 

[LDFerguson]

To clarify my suggestion - your business presumably has an account manager dealing with them. It might help if your own mortgage query was routed through them. Without resorting to threats, veiled or otherwise, if your boss simply contacted the account manager and said "One of my senior employees has this mortgage. Can you go away and see if there's anything you can do for her?" This would be likely to get more of a hearing than one customer, although I can make no promises as to its success.

 

[Calcutron]

Thanks Guys,

LDFerguson, that sounds like a sensible suggestion - I'll ask my employer to see if I can take that approach.

And you know, even if it doesn't work I'll feel better having given it a good shot....

In a seperate question - do you really think any other bank would take me on? My own bank AIB for example knows my excellent credit history and high monthly incomings- would they still run a mile? I'd essentially be asking them for a 100% mortgage, and would be spending about 30% of net take home salary on repayments.....

 

[Bronte]

Put your 10K savings against the capital remaining on your mortgage and use your extra 1100 to increase your repayments until you are out of negative equity. You should try not to be in a position that you have to rely on one bank. Ideally as banks are now giving 80% loan to value mortgages you should strive to get to that level. If you think 6.7% is a subprime rate what would you do if it went higher, maybe you need to look at fixing to give yourself peace of mind.

 

[NorfBank]

Unfortunately due to your loan to value, another bank will not allow you to remortgage with them.
As you say AIB would, in effect, be giving you a 100% mortgage, this simply is not prudent lending and would fail the underwriting criteria of any bank especially in today's climate.

 

[Kate10]

Hi Calcutron,
We recently remortgaged after coming off a fixed rate of 3.4% (boo hoo ..wish we still had that rate) and we would have been offered only about 6.4% with our existing lending institution. We weren't willing to pay that and remortgaged to AIB's 3 year fixed at 5.25%.
We got a valuation that gave us 80% LTV. We bought our house 3 years ago. In the first 18 months it rocketed in "value" (would have had about about 70% ltv at the highest point), then obviously really dropped back. If we put our house on the market now at the valuation given by the bank I think we would have trouble selling it. I think AIB gave us the mortgage because we have an excellent credit rating, and our income is more than sufficient to make the repayments.

How hard would it be for you to get an ok valuation? Are a lot of properties in your area for sale for less than you paid? Valuations are subjective so maybe you could get an ok valuation. The bank will still discount it..but it might be enough to get you over the top on the application.

 

[elcato]

Another point of negotiation may be to offer to break from your current fixed rate early. I know its only 4 months but they may look favorably on such an effort on your behalf.