# Current thinking on best mortgage types?



## Jock04 (22 Feb 2007)

Hi

My fixed rate deal with PTSB expires shortly.
If I don't pick a new deal, I default to a Tracker. A new fixed rate would cost me approx €70 to €100 a month extra over the current Tracker rate, for periods up to 10 years.
I can afford the extra, but am unsure whether current thinking is that rates will rise enough over a reasonable period to make the fixed-rate worthwhile.
Trackers seem very popular at the moment, I'm sure there is good reason for this?
I know it's a guessing game, but would appreciate any input. 
Thanks


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## ClubMan (22 Feb 2007)

A good value (i.e. low margin) tracker rate will most likely minimise your interest charges in the long run compared to standard variable or fixed rates. In addition both tracker and standard variable loans are much more flexible than fixed rates (e.g. you can make accelerated lump sum or regular capital repayments or switch lenders without the penalties that would apply on most or all fixed rate loans). Unless you are concerned that you would be hard pushed to meet your mortgage repayments if rates increased by a few % then you would probably be best off opting for the most competitive tracker available for your specific circumstances (which may involve switching lenders).


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## Jock04 (22 Feb 2007)

No real worries about meeting my payments, I was just curious about whether hedging against a scary escalation of rates would be prudent. It went to 15% or so once in my memory, it could again, although I believe it's less likely now.
Very good point concerning penalties, something I hadn't paid enough thought to.
Thanks, Clubman.


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## ClubMan (22 Feb 2007)

Jock04 said:


> I was just curious about whether hedging against a scary escalation of rates would be prudent.


Fixing in an attempt to time the market, second guess the financial institutions and save money over a competitive tracker rate is a mug's game. Only fix if you really need to.


> It went to 15% or so once in my memory, it could again, although I believe it's less likely now.


 That was during the currency crisis when some rates went as high as 20% as far as I recall. Less chance of this happening these days especially with the _ECB _in charge of rates. For example given the state of our economy at the moment rates should arguably be much highere but since they are set centrally for all of the eurozone these days they are relatively low.


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## gonk (22 Feb 2007)

ClubMan said:


> Unless you are concerned that you would be hard pushed to meet your mortgage repayments if rates increased by a few % then you would probably be best off opting for the most competitive tracker available for your specific circumstances (which may involve switching lenders).


 
It requires a little discipline, but another option if you are concerned about meeting the cost of rising interest is to take the variable rate, but save the difference between the variable and fixed rate. If rates go up you have some cash to cushion the blow, if not you get to keep the money instead of the bank.

For example, the current difference in repayment per €1,000 for a 20 year loan term on the variable and five year fixed rates from the EBS is 8 cents. If you have, say, a €400k mortgage, put aside €32 per month in a savings account as a reserve against the possibility of rates rising.


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## ClubMan (22 Feb 2007)

Or just make the accelerated capital repayments with such spare cash to save money immediately and reduce the effective term of the mortgage. Use Karl Jeacle's mortgage calculator to estimate the possible savings involved.


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## tiger (22 Feb 2007)

Yes, I think it would take something catastrophic like the Euro being dismantled for rates to hit 15% again.


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## NorfBank (22 Feb 2007)

How much is outstanding on your mortgage?
How much is your property worth?


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## Persius (22 Feb 2007)

tiger said:


> Yes, I think it would take something catastrophic like the Euro being dismantled for rates to hit 15% again.


 
Or, less catastrophic on an EU-wide scale, Ireland to leave the Eurozone.
I know it's unlikely, but it certainly can't be entirely ruled out over the next 30 years (typical mortgage term)


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## Jock04 (22 Feb 2007)

NorfBank said:


> How much is outstanding on your mortgage?
> How much is your property worth?


 
About €160K
About €450K, a lot more if I got OPP for some of the fields I have adjacent to the one my house is on, but which I'm in no hurry to do.

Clubman, thanks for the link to the Mortgage Calculator. Very interesting reading. 
Do all banks readily accept extra payments? When I was taking out my mortgage I asked about paying weekly or fortnightly, which is common practice elsewhere to reduce interest. I was very much put off the idea by the bank, who inferred very little benefit for much potential extra hassle.
I also note that my bank will charge 50% of interest lost to them if I pay my mortgage off early. Is this standard with all lenders now?
Thanks again


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## NorfBank (22 Feb 2007)

With such a low loan to value you will qualify for the best preferential tracker rates on the market.
Currently ECB + 0.5% (4.5%) with NIB and ECB + 0.6% with AIB (4.6%)

Best 1 year fixed is 4.34 - expect this to hit 4.5% + before the March interest rate increase. Thus by going on a low tracker you already have the safety of two 0.25% interest rate increases before you pay up to the 1 year fixed rate.

It's all opinion at this stage as to how many rate increases there will be but over the long term the tracker works out at better value.

A rule of thumb regarding the penalty for breaking a fixed term is 6 months interest repayments. This will depend on where rates were when you fixed the mortgage and where they are when you want to redeem it.


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## ClubMan (22 Feb 2007)

Jock04 said:


> Do all banks readily accept extra payments?


On variable/tracker rate loans they cannot penalise you for making additional capital repayments. Some may have minimum lump sum amounts that they will accept. Most should allow you to increase your monthly repayments above their normal amount to allow for regular capital repayments thereby shortening the effective term.


> When I was taking out my mortgage I asked about paying weekly or fortnightly, which is common practice elsewhere to reduce interest. I was very much put off the idea by the bank, who inferred very little benefit for much potential extra hassle.


Extra hassle for them maybe but increased savings for you if you make repayments more frequently and your lender calculates interest daily (as most do these days).


> I also note that my bank will charge 50% of interest lost to them if I pay my mortgage off early. Is this standard with all lenders now?


On a fixed rate yes. Illegal on a variable/tracker home loan though.


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## Jock04 (22 Feb 2007)

Folks, 
I'm now in a much better position to make the right decision than I was just a few hours ago.

I've always found good advice here. It's appreciated.

Thanks,  Clubman & Norfbank.


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## irishpancake (22 Feb 2007)

Hi Jock

Just to add another lender for your consideration, [broken link removed] offer a 12-month teaser rate for Switchers, which for your LTV would be equal to the current ECB rate (3.50%), thereafter rolling to their standard Tracker (ECB +0.95%).

Also, note, they promise



> we will pay your title insurance costs or €1,000 towards your legal fees. *However, if you move your mortgage from Halifax within five years, you will have to repay this legal contribution to us.*
> And we will pay your valuation fees (up to €150), once you drawdown your mortgage.


. 

see [broken link removed]

Not sure if NIB or AIB pay these contributions, so it may be worth your consideration.

On the face of it though, NIB seems to offer a better long-term prospect, as they promise ECB +0.5% for the full term of your mortgage.


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## ClubMan (22 Feb 2007)

[broken link removed] also have a useful guide on mortgages.


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## Jock04 (7 Mar 2007)

Just to update you - spoke with PTSB & made them aware I knew there were better deals than the one they were offering me.

Result - 0.25% knocked off my tracker rate.

All due to 1 phone call, and good advice from Clubman & Norfbank.

Thanks, folks!


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## HMC (7 Mar 2007)

Ooh I do love a happy ending - well done!


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## Squire (8 Mar 2007)

Thanks for the heads up jock04, after reading this thread I rang Ptsb and they did the same for me. Knocked .25% off the rate with no questions asked. (now ECB + 1%) It seems like it is policy for them to do this if anyone queries the rate they are on.

I doesn't mean I am going to stick with Ptsb but at least I am on a better rate until I get a chance to get myself the best deal available (probably ECB +.5%)


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## Jock04 (8 Mar 2007)

Welcome, Squire.
Always glad to see someone saving a few bob! "Pays for" todays interest rise anyway!

Like you, I'll still be shopping around in the future, but I was glad of the advice here that led me to ask the right questions! That 1/4% over a year is worth saving!


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## flusteredma (8 Mar 2007)

I'm also with PTSB and bought 18 months ago.  My rate has gone from 2.2 per cent and now I believe its 4.75% tracker rate - big jump for us.  Caled PTSB last week and asked them to give me a better deal on their published fixed rate and have been offered a fixed rate of 4.95% for 3 years.  Considering their fixed rate last week (before the hike today) was 5.1 I'm really tempted to go with it - even though I will have to pay them a once off fee of 100 euros (transfer fee as they say in their letter).  I'm really scared about interest rates going up in line with improvement in the German economy? We cannot move bank as our financial circumstances have changed since getting mortgage (ie I gave up my job to take care of my kids, wow imagine that!) So any solid reasons why I should not go with this offer would be appreciated.  I have seven days to think about it, apparently.


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## ClubMan (8 Mar 2007)

See here:

Interest rates - Fix or tracker?


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## Gunnerbar (8 Mar 2007)

irishpancake said:


> Not sure if NIB or AIB pay these contributions, so it may be worth your consideration.




Was just down with NIB and they will offer to pay 600  towards solicitor fees or you can use their one for free and they said they'll pay 100 euro for a professional valuation.  The only thing that really worries me is that the loan is "subject to a 2% interest sensitivity test." Does anyone know what this is, and what are the charges I can expect from other institutions including BOS. 

NIB's LTV loan looks interesting and seems extremely popular, with the majority of  a 51 % increase in mortgage business since it's introduction in October down to this product. 

It's offering a tracker (before their ECB increase on Wednesday) of 4.08%. Seriously thinking of switiching as it seems to be the most competitive rate around. 

The loan would be about 50% of mortgage over 12 years. Is this a no brainer?


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## Jock04 (9 Mar 2007)

AFAIK, the test is....if interest rates go up by 2%, would your income still mean you mortgage was = or less than 30% of your disposable income.

Think you can probably check this yourself using one of the links to a mortgage calculator here.


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