Is the AIB variable rate attractive now compared to a tracker?

D

David_Dublin

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1) Existing tracker margin. (This is set in your mortgage contract.)
ECB + 1%

2) If you have an additional mortgage on the same property, what is the rate?
Yes, standard variable rate, 250k

3) Amount outstanding on your mortgage
140k on tracker

4) Remaining term
18 years

5) Lender
AIB (both, both 18 years)

6) Value of your home
1.2m

7) Might you trade up or overpay your mortgage?
Likely to pay off with bonuses in the coming 3 years

8) Do you face any barriers to switching? E.g., an impaired credit record, a mortgage with a warehoused portion due to a restructuring, reduced income since you took out your mortgage, you are now renting out the property.
No

9) What rates are you considering fixing at?
Not currently thinking of fixing

10) Does your house have a high BER rating which might qualify it for a lower rate? Check it here or estimate it if necessary.
B2

11) How well could you handle a further 2% rise in the ECB rate?
Probably reasonably OK, the non tracker mortgage would be the concern given its a bigger proportion of overall mortgage.


At the moment the tracker is more expensive than the variable rate, and the fixed rates are looking more appetising with the tracker moving to 4% shortly.

I'm going to stick with standard variable rather than fix.
 
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David_Dublin said:
Likely to pay off with bonuses in the coming 3 years
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David_Dublin said:
Probably reasonably OK, the non tracker mortgage would be the concern given its a bigger proportion of overall mortgage.
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I presume that you mean that you will pay down your mortgage, as distinct from pay off your mortgage. If so, then maybe hang onto the bonuses to make sure you can afford any increased repayments. You get no "credit" for overpaying your mortgage but your credit record is damaged if you miss repayments, even if you are ahead of the original schedule.

Brendan
 
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You raise a very interesting question.

The AIB variable rate for <50% LTV is 2.75%
Your tracker will cost you ECB + 1% which is 4%
You could fix for 5 years at 4.1%
But as your total mortgage is €390k , you could fix for 4 years at 3.75%
Or a 5 year Green rate at 3.65%

With ECB rates at 3%, I doubt that the 2.75% variable rate will last long, so I don't think you should swap out of a tracker for it.

A margin of 1% is worth a fair bit with 18 years to go.

On balance, I would stick with the tracker.

The €250k variable bit is more difficult. I think I would fix for 5 years at 3.65%

Brendan
 
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David_Dublin said:
11) How well could you handle a further 2% rise in the ECB rate?
Probably reasonably OK, the non tracker mortgage would be the concern given its a bigger proportion of overall mortgage.
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I don't fully understand that.

You have one mortgage. That is all you need to worry about. It does not matter what proportion one is of the other.

If you can handle a 2% rate rise, then you don't urgently need the insurance of a fixed rate. (I am not saying that you should not fix. It's just that people who are at the limit should fix for the security.)

Brendan
 
Brendan Burgess said:
I presume that you mean that you will pay down your mortgage, as distinct from pay off your mortgage. If so, then maybe hang onto the bonuses to make sure you can afford any increased repayments. You get no "credit" for overpaying your mortgage but your credit record is damaged if you miss repayments, even if you are ahead of the original schedule.

Brendan
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Yes, pay it down. I issued an instruction to move off tracker onto standard variable rate yesterday. Logic being: 2.75 svr versus 4% tracker. I know it's only a point in time and we may regret it.

Brendan Burgess said:
You raise a very interesting question.

The AIB variable rate for <50% LTV is 2.75%
Your tracker will cost you ECB + 1% which is 4%
You could fix for 5 years at 4.1%
But as your total mortgage is €390k , you could fix for 4 years at 3.75%
Or a 5 year Green rate at 3.65%

With ECB rates at 3%, I doubt that the 2.75% variable rate will last long, so I don't think you should swap out of a tracker for it.

A margin of 1% is worth a fair bit with 18 years to go.

On balance, I would stick with the tracker.

The €250k variable bit is more difficult. I think I would fix for 5 years at 3.65%

Brendan
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Thanks for this. One "wrinkle" is that the house refurb is not yet complete, so B2 is not there yet, nor is the 250k fully drawn down. I was simplifying things a little, the above numbers are my end of refurb position, so should be in August .

Brendan Burgess said:
I don't fully understand that.

You have one mortgage. That is all you need to worry about. It does not matter what proportion one is of the other.

If you can handle a 2% rate rise, then you don't urgently need the insurance of a fixed rate. (I am not saying that you should not fix. It's just that people who are at the limit should fix for the security.)

Brendan
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I used this logic to move off the tracker: the tracker is going to be 4% shortly, and the variable rate is 2.75%. My thinking is that I'll move everything to fixed/green when the job is done, I'm guessing that variable rate hopefully won't catch up to tracker.

Side thought - I wonder if AIB are using a strategy of keeping svr below tracker to entice people off the tracker, in which case we have played into their hands perfectly!
 
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David_Dublin said:
Side thought - I wonder if AIB are using a strategy of keeping svr below tracker to entice people off the tracker, in which case we have played into their hands perfectly!
Click to expand...

Yes. That is certainly a possibility.

When people's fixed rates were up with ptsb and they were entitled to trackers, they priced the SVRs a bit below the trackers and loads of people fell for it.

Brendan
 
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