# Fixing to 5.75% :(



## fuzzy10 (8 Jan 2011)

Long story short... owe 270k, currently on svr of 4.65% with PTSB. Afraid of the coming interest raises and considering fixing. Choice: 2yrs 5.2% and 5yrs 5.75%.

Shocking rates but cant change banks, probably 60k in negative equity!
Opinions please, need to decide this week to avoid going loco thinking about it!


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## fuzzy10 (10 Jan 2011)

Rang PTSB today and was advised that I pay 100e for the privilage of fixing. A final kick in the balls...


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## Maggs065 (10 Jan 2011)

fuzzy10 said:


> Rang PTSB today and was advised that I pay 100e for the privilage of fixing. A final kick in the balls...


 
I fixed last year with UB - they told me the fixing fee was €150. I completely forgot to send in a cheque with my application (honestly). They never came after me for it.


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## fuzzy10 (10 Jan 2011)

might try that mags!


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## thedaras (10 Jan 2011)

Im with PTSB and came out of a five year fixed very recently.
I was also over a 5.75% fixed year rate.It is IMHO way too expensive.
Having looked through the threads on AAM ,I finally decided I would go on the variable rate and put the extra money that I would have paid ,off the balance each month.


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## robd (11 Jan 2011)

If you look at long term interest rates going back through time for US and Germany (pre Euro), 6% is about average.  So although 5.75% fixed and 4.65% variable seem high, it's just relative to ultra-low interest rates over the last decade.  We know now that those interest rates were a complete anomily and as such when it's all over we'll return to the norm.  Small comfort I know, but these are the facts. Spare a thought for the Aussies who's interest rates are currently 7%.


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## Bronte (11 Jan 2011)

I would second what thedaras says.  If you can pay 5.75 now then pay that extra amount into your mortgage from now, reducing your balance and if interest rates go up you've less capital remaining so the effect will be less.  Personally I don't see variable rates going near 5.75 for the next 2 years.  But nobody can be sure.  If you want peace of mind then fix.


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## robd (11 Jan 2011)

Bronte said:


> I would second what thedaras says.  If you can pay 5.75 now then pay that extra amount into your mortgage from now, reducing your balance and if interest rates go up you've less capital remaining so the effect will be less.  Personally I don't see variable rates going near 5.75 for the next 2 years.  But nobody can be sure.  If you want peace of mind then fix.



Don't know where you're getting that from.  PTSB's variable is 4.65%.  10 year Irish government bond is 8.65% today.  ECB is at 1% and they will need to start retuning to normal 4.5% at some stage, prob 2012.  Bank will need to raise margin in the short term to cover funding deficit.   I belive 6-7% range for all banks is an absolute certainty over the next 24 months and beyond.  I expect imminent announcments of 0.5% increase with 2 x 0.25% increases in H2.


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## deeheg (11 Jan 2011)

Hi am in similar but am not fixing I dont see interest rates going up again for a bit and if they do still be similar but i lost out on the low rates so now not willing to chance it again


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## Bronte (12 Jan 2011)

robd said:


> Don't know where you're getting that from. PTSB's variable is 4.65%. 10 year Irish government bond is 8.65% today. ECB is at 1% and they will need to start retuning to normal 4.5% at some stage, prob 2012. Bank will need to raise margin in the short term to cover funding deficit. I belive 6-7% range for all banks is an absolute certainty over the next 24 months and beyond. I expect imminent announcments of 0.5% increase with 2 x 0.25% increases in H2.


 
If you're correct with an extra .5 that would bring the current variable to 5.15 still below the 2 year and 5 year fix.  6% versus 5.75 is not a big difference and the OP can do that as he seems to able to afford 5.75%.  7% is a different matter.  I can't call that one and you may be right. 

Banks do need to increase their margins, but I don't think the Irish people can afford it as they are so stretched and it's politically not a good idea for the PTSB which may prevent them doing the increases in H2 (I presume you meant the second half of 2011 ie June onwards).


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## robd (12 Jan 2011)

Interesting article in todays Indo re fixed rates and banks looking to abolish them.

Article is inline with my expectations of 1% increase in variable rates this year.

Also points out the swap rates are between 7pc and 11pc, ie what banks have to pay.

http://www.independent.ie/business/...te-mortgages-in-bid-to-cut-costs-2492693.html

Most people don't like to fix becase they've been caught out with it in the past due to low interest rate environment.  They feel it was a bad deal and a waste of money etc.  This is the very think that will burn them twice.


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## fuzzy10 (12 Jan 2011)

Very interesting article...

My view point is, im currently paying 4.65% svr. "estimates that variable rates will rise by at least 1pc this year." that makes my svr at 5.65%.

It wont be long now when the ecb start raising interest rates,lets say last quarter of 2011 at 1%. 

" Economists reckon European Central Bank rates could rise later this year. That would mean both variable and tracker mortgage repayments increasing."

That puts my svr at 6.65%.. a svr rate that PTSB would like to see.

So,by the end of this year 2011 of the start of 2012,PTSB svr rate will be 6.65% and the only way the ecb rates will go is UP.

Thats my opinion.


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## sillo (12 Jan 2011)

FTB here, looking at a 3.29% variable today, option to fix at 4.39% for 5 years. Seems to me to be a no-brainer, as ECB rates will surely be going up at least 1pc in that timeframe, not to mention the banks need to claw back some of that bailout money.

Is this an overly simplistic view; I know these things are not black and white but given that I can afford the 4.39% (with a little stretch admittedly), I think I would be mad not to take it?


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## fuzzy10 (13 Jan 2011)

thats a good 5year rate sillo.

I seeked independent advice yesterday & he was of the same opinion about interest rate hikes.


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## DerKaiser (13 Jan 2011)

Hi All, I'll try to keep this simple!

The market in bonds provides us with expected interest rates in the future. A schedule of interest rates known as the "Swap Curve" is one of the most used by economic forecasters.

As at 31/12/2010, the Swap Curve estimates the following approx rates (rounded):

2011: 1%
2012: 1.5%
2013: 3%
2014: 3.25%
2015: 3.75%

If you have a €100k mortgage, that would mean €7.5k extra in interest payments resulting from interest rate hikes. It would be comparable to moving immediately to a fixed rate 1.5% higher than the variable rate for 5 years.

If you take it as a given that banks will increase interest rates by at least 0.5% in the absence of interest rate increases, then this implies that anyone on a variable should be happy to fix at a rate that is not more than 2% higher than their current rate over a 5 year timeframe.

This will not apply to trackers as the fixing will cause you to lose your tracker forever, which is more difficult to quantify the cost of.

To put this idea in context, however, the same comparison done at 30/09/2010 would have suggested you should only be happy to fix if the rate is 1% above your current variable rate over a 5 year timeframe. 

The change has been driven by the fact that inflation is expected to return sooner than expected as a result of Europe (Germany) recovering faster than expected.

These variables change daily and are the best info to hand in the fix or not decision. It shows just how uncertain it is as to what the correct course of action is.


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## NorfBank (13 Jan 2011)

DerKaiser said:


> These variables change daily and are the best info to hand in the fix or not decision. It shows just how uncertain it is as to what the correct course of action is.



That is helpful Kaiser but is based on forecasts and assumptions, the curve is not always right.

When you are deciding whether to fix or not, you must look at your own personal circumstances and try and disregard external factors. It's all well and good being on a 5 year fixed rate until you need to move house 3 years in.

Add 2% to your current variable rate and see what your repayments will be. If you can afford them then it would be wise to stay on the variable rate, if you are overstretched then you should consider fixing.

Your main goal is to make sure you can continue to comfortably pay your mortgage and keep your credit record intact, a secondary objective is to save money.

[broken link removed]


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## DerKaiser (13 Jan 2011)

NorfBank said:


> That is helpful Kaiser but is based on forecasts and assumptions, the curve is not always right.


 
Well any guess of future interest rates is a forecast.  The curve will most certainly not be right, but it does take account of all known information at this point in time meaning we have nothing better to go on.

You make some good points on personal issues alright, people have to examine their own personal issues to see if their only concern is keeping the expected costs to a minimum or if they have other issues.

I decided to post this because I'm very wary that people are incorrectly extrapolating from the last few years, where interest rates seem to have remained unexpectedly low.  This will not always be the case.  

If someone can just about get by on a 5 year fixed rate of 1% higher than a variable rate but would suffer severely if rates rose much higher, I would strongly advise that person to secure their finances by fixing now.

Any advice telling people to remain on variable over the last few years has turn out to be good advice, but that outcome should now be disregarded as it is no indicator of the same thing happening in the future.


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## Bronte (13 Jan 2011)

DerKaiser said:


> If someone can just about get by on a 5 year fixed rate of 1% higher than a variable rate but would suffer severely if rates rose much higher, I would strongly advise that person to secure their finances by fixing now.
> 
> .


 
That's what the OP and others have to decide.  Forget about markets or forecasts and look at what he can afford and base the decision on that.


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## DerKaiser (13 Jan 2011)

Bronte said:


> That's what the OP and others have to decide. Forget about markets or forecasts and look at what he can afford and base the decision on that.


 
Yep, just to add that anything less than a 5 year term is hardly worth fixing for as it will cost you in the very short term and any savings made after that will be too short lived


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## sillo (13 Jan 2011)

@Derkaiser and @Norfbank: Thank you both for your clearly informed opinions. You both make very valid points in a very clear way.

I think I'll go for the fixed rate. I can afford the higher rate (though it is a slight stretch) and believe that even on the off chance it ends up being bad for me then at least it (A) affords me peace of mind for 5 years and (B) protects me from whatever extra-curricular nonsense the banks get up to with their variable rates in the next while.


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## NorfBank (14 Jan 2011)

You're welcome sillo.
Good luck with the new house - don't forget to shop around for the related insurances.


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## Bronte (14 Jan 2011)

Listening to the BBC wake up to money this morning they talked about mortgage rates and inflation etc.  They don't think the ECB will raise rates until later this year, they also thought that even though banks want to raise rates they are afraid to do so as customers are so stretched already, that was about the UK economy but the same could be said of Ireland.


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## Molly Bloom (14 Jan 2011)

I didn't hear that BBC programme this morning, but would be slightly wary of taking comfort from what they were saying and applying it to Ireland ..... It's just my view that the banks in this country will do with impunity whatever it takes to suck in cash to repair their bottom lines / reserves. In the UK banks might be more hesitant, fearing a backlash from either Government or the public.

I do agree that it seems an ECB rate-rise has been pushed back to the second half of the year.


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## racer (14 Jan 2011)

Hey im in same boat. My fix is up. Im with EBS and ther variable is 3.83 i think now while there fixed 5yr 5.65 according too their website. Im in 2 minds what to do. I can afford 5yr fixed. Im thinking of just putting what i save on variable into a saving account at approx 4% and just go with variable.


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## DerKaiser (14 Jan 2011)

Given the gap is almost 2%, it make your decision trickier than Sillo's.  If you stick with the variable it would certainly make sense to start putting away money now in anticipation of rate rises.

There might not be ECB rate increases over the next 12 months but when they do start increasing you could see increases of 3% i.e. your variable rate could easily go up to 6%-7% by the year after next.


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## racer (14 Jan 2011)

Thanks DerKaiser. Ye i was thinking that myself too.Its a catch 22 situation. I expect EBS to increase there variable soon. If they do i will prob then go to fixed.


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## NorfBank (14 Jan 2011)

Be careful though, if they move their variable, they more than likely will increase their fixed at the same time.

www.moneybackmortgages.ie


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## fuzzy10 (15 Jan 2011)

Yes.. a variable increase usually leads to a fixed rate increase!


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## robd (16 Jan 2011)

Was just pointed out the me on another site that PTSB are now only offering fixed rates if LTV <=50%

https://www.permanenttsb.ie/whatweoffer/mortgages/interestrates/


THIS IS VERY SIGNIFICANT IMO.


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## Phil_space (19 Jan 2011)

For what it's worth I'm with NIB and my current 5 year fixed (3.8%) is up in a couple of weeks.

Before Xmas I was quoted the following fixed rates for the new term:

2 year 3.4%, 3 year 3.6%, 5 year 3.95%

I spoke to my Customer Adviser in NIB a couple of weeks ago in relation to making the change to be told the fixed rates had changed to:

2 year 3.7%, 3 year 3.9%, 5 year 4.4%

I had made a decision on this and contacted my CA this week in relation to same only to receive the reply that she had just been notified by head office that the FRs were going up from Jan 24 to:

2 year 3.8%, 3 year 4.1%, 5 year 4.6%.

So clearly a lot of volatility here. Not sure if they are trying to milk the fixed rate customers to cover bad debts or if it's a reflection of the market. But either way has thrown me into turmoil. BTW the variable rate at 3.4% has remained unchanged throughout. Are they afraid to raise this in case it leads to defaults I wonder?

Phil


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## wheelerp (25 Jan 2011)

*6.1%*

I'm in a similar situation to fuzzy10 ....stuck with PTSB.  Offered 2yr 5.25%, 5 yr 5.75%, or 7 or 10 yr at 6.1%.

Had a fixed for 2 years that I lost out on, then switched to variable - which was good at making up some ground.  Worried though about increases, couldn't handle much more & can't move to another lender.

From what I can tell, it seems the 5 yr might be a good idea - but if things are likely to go up to 6-7% should the 7 and 10 yr options be considered?


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## tester1 (28 Jan 2011)

We fixed two years ago at 5.5 % for 10 years. 
Have been kicking myself ever since, until I read this thread. 

So far we have lost out big time by fixing buy maybe we wont over the next 8 years.


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## gianni (28 Jan 2011)

racer said:


> Hey im in same boat. My fix is up. Im with EBS and ther variable is 3.83 i think now while there fixed 5yr 5.65 according too their website. Im in 2 minds what to do. I can afford 5yr fixed. Im thinking of just putting what i save on variable* into a saving account at approx 4%* and just go with variable.



Where would you get this rate?


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## racer (28 Jan 2011)

gianni said:


> Where would you get this rate?


 
Variable rate is what they have informed me what i am on. Fixed rate is what they quoted me over the phone.
Im with EBS


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