# To Fix or not to Fix that is question



## ccbkd (17 Jun 2009)

I see in Papers today, the powers that be are advicing people with variable and tracker mortgage to avail of the deals for Fixing Mortgages as the current crisis has hit rock bottom and the European economies will start to show growth leading to an increase in interest rates..is it time to fix or is it still worth hanging onto Tracker for now??


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## NorfBank (17 Jun 2009)

What's the margin on your tracker?


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## ccbkd (17 Jun 2009)

Not Self specific - just up for debate with the wider user of forum


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## Slim (17 Jun 2009)

Fixed rates always favour the banks unless unforeseen circumstances cause a spike in interest rates. They predict ahead and ensure there is a margin for them in the rate. Unless you are very averse to rates that climb steadily/slowly you should stay on a tracker or a variable.


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## jack2009 (17 Jun 2009)

I would only suggest fixed rate mortgages if you feel that it is important for you to know what your outgoing are.

I am a firm believe that the banks always win.  Backing up Slim's post, the banks will have factored in any expected increases in interest plus a bit more!


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## pinkyBear (17 Jun 2009)

If you are in a tracker mortgage I would stay put - it is my biggest regret that we fixed...you never know what is around the corner..


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## irishlinks (17 Jun 2009)

ccbkd said:


> I see in Papers today, the powers that be are advicing people with variable and tracker mortgage to avail of the deals for Fixing Mortgages


  Those "powers that be"  quoted in the Independent are  mortgage brokers - who of course may  gain financially if people switch mortgages  through them.  (Just trying to get some more business ?)
Fixed rates are starting to rise - so if you *want* to fix now is probably a good time.  Whether to fix or not is a bigger decision. 
People could try and do a 50% on a fixed rate and 50% on variable if your  lender lets you.


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## micheller (17 Jun 2009)

Just on the 50/50 option- as far as I remember last time I checked this with AIB, we would actually lose our v favourable tracker on the non-fixed half if we decided to go with it.
IMO Only fix if you need to know your outgoings over a set period and can afford to pay for the luxury of this, which if you have a great tracker could be 200+ a month with the current longer fixed rates (which I don't actually think are all that good TBH). Even if you choose a shorter 2/3yr fixed you may be giving up a great tracker for a short period of stability and will come off it then onto what?
Best of luck....


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## lionstour (17 Jun 2009)

Suffer the slings and arrows of outrageous fortune and remain on a variable rate would be my advice.

,


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## Babsi (17 Jun 2009)

If someone was getting a new mortgage (if we get one)!!! Should we go with brand new variable or new fixed?


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## NorfBank (17 Jun 2009)

Only fix if you need to be sure of your future repayments, otherwise go variable. Don't try and time the market.


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## Berbatov (17 Jun 2009)

Babsi said:


> If someone was getting a new mortgage (if we get one)!!! Should we go with brand new variable or new fixed?


 
i would go with a new discounted fixed interest rate from the lender ,for example  BOI have a 2 year new introductory fixed rate i think at present , 2.65% i think.


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## Babsi (17 Jun 2009)

So what your saying is I have to decide myself!!!!  Agggghhhhh!!!  Thanks - this is what we were quoted with one bank:
Variable 2.70% €998 gross 
2 yr fixed 2.75% €1,006 gross


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## michaelm (17 Jun 2009)

Babsi said:


> If someone was getting a new mortgage (if we get one)!!! Should we go with brand new variable or new fixed?


I intend to get a new mortgage in the near(ish) future.  I would be looking at a split (50/50 probably) AIB mortgage, half variable and half fixed for 10 years @ 4.41% currently.


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## LDFerguson (17 Jun 2009)

michaelm said:


> I intend to get a new mortgage in the near(ish) future. I would be looking at a split (50/50 probably) AIB mortgage, half variable and half fixed for 10 years @ 4.41% currently.


 
AIB's ten year fixed rate gone up to 4.65% with effect from today. 

On the general point, I'd agree with everything Norfbank has said above. 

I'd also re-iterate that if you have a low margin tracker (say <1.5% above ECB) and a good few years left on your mortgage I'd be VERY reluctant to give up your tracker to fix now, as it's extremely unlikely that you'll get such a tracker again. So you get a fixed rate for a few years, but then are forced to accept whatever rates your lender throws at you for the rest of your mortgage. 

Another option for anyone who is considering fixing is to save up the difference between their current variable rate and the fixed rate repayments. If the variable rates increase, use the savings to help you pay.


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## kildon (17 Jun 2009)

what are the latest forecasts for ECB rate...bloxhams forecast 1% to march 2010, I think the ESRI forecast 1% for the whole of 2010...would be interested to hear other forecasts

as LDFerguon pointed out, you'd be giving up the tracker for life and only getting the fix for 5 years, after the 5 years you'll be getting a high variable rate as banks are no longer going to offer lower margins

it's very possible that a 5 yr fix could be better than a tracker (depends on the tracker rate) but over the life of a mortgage US studies have shown that variable rate mortgages are cheaper


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## CJPC (18 Jun 2009)

I have a good tracker and I'm holding onto it, rate rises or not.


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## Bronte (18 Jun 2009)

NorfBank said:


> Only fix if you need to be sure of your future repayments, otherwise go variable. Don't try and time the market.


 
This is good advice but it is also true that we are at a historical low, the lowest point I have ever experienced and it really can't go any lower so I'd fix.  This is based on someone who remembers rates at 15%+ etc.  People should bear in mind that a rate jumping from say 3 to 6 percent is a doubling whereas say a 10 to 13 is not even though it's an actual 3% increase in both cases, this is particularly important for people who have only recently begun their mortgage and most of the payments are interest.  

There is a particular argument in relation to (the lower) tracker mortgages and most financial people on AAM advise on not letting this rate go.  I'm not so sure.  

LD - On the point of people saving the difference between what they are paying on the variable versus the fixed, most people do not have the discipline to do this.  With deposit interest so low and especially for people in negative equity it would be better to be putting all spare case to pay down the mortgage.  

I guess the best advise to everyone is that you need to recognise your own personal circumstances and what you can afford and then decide what to do.  None of us has a crystal ball.


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## Kate10 (18 Jun 2009)

My husband and I sat down to go through the household budget last night and discuss fixing.  We've decided to fix for 4 years at 3.57% (currently on AIB standard variable of 2.25%).

We thought about all the arguments set out on this thread, and considered saving the difference instead, but ultimately decided that 3.57% is a rock bottom rate.  We would have taken your hand off for it at the beginning of last year.  I think rates will start to come up by the beginning of 2010.  We have a very big mortgage, and my husband has had a 10% salary cut.  If rates go above 4.2% we are in trouble.  We decided to take the pain now for some security down the line.  Our broker agrees and doesn't make a cent from our decision by the way, as we are staying with the same bank!

I think it really depends on your personal financial circumstances.


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## michaelm (18 Jun 2009)

LDFerguson said:


> I'd also re-iterate that if you have a low margin tracker (say <1.5% above ECB) and a good few years left on your mortgage I'd be VERY reluctant to give up your tracker to fix now, as it's extremely unlikely that you'll get such a tracker again.


I'd agree with this.  I've a very low margin tracker and wouldn't dream of fixing but I'll be moving house in the near(ish) future so will face the fix or not quandary.


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## LDFerguson (18 Jun 2009)

Bronte said:


> This is good advice but it is also true that we are at a historical low, the lowest point I have ever experienced and it really can't go any lower so I'd fix. This is based on someone who remembers rates at 15%+ etc. People should bear in mind that a rate jumping from say 3 to 6 percent is a doubling whereas say a 10 to 13 is not even though it's an actual 3% increase in both cases, this is particularly important for people who have only recently begun their mortgage and most of the payments are interest.


 
It's also worth remembering that when rates were at 15%+, Ireland was setting its own interest rates in isolation.  This was before we joined the ECB.  

Yes rates are at a historical low and have little or no scope to go lower.  Yes, I'd agree that rates are likely to go back up.  What none of us know is when they will go back up and how far - that's the speculative bit.  

The timing issue is crucially important.  If someone fixes now for three years and pays a margin of 1% or more over the variable rate for the fix, they're paying 1% extra immediately.  If variable rates don't start going up until mid-2010, as some economists believe, they've paid a 1% premium for security for a year.  If rates creep up in quarter percent increments that the ECB tends to favour, they may never recoup what they've lost.  

At the end of the three year fixed period, they're back on whatever rate is available then anyway.  



Bronte said:


> LD - On the point of people saving the difference between what they are paying on the variable versus the fixed, most people do not have the discipline to do this. With deposit interest so low and especially for people in negative equity it would be better to be putting all spare case to pay down the mortgage.


 
I'd agree with the discipline issue.  Many Irish wouldn't be too great on that score.  

But I'm not so sure that paying money off the mortgage is always the best route, especially if one is in negative equity.  While mathematically it's good advice, you're locking up the overpayments, never to be gained again, with the possible exception of KBC Homeloans with their re-draw facility.  In these uncertain times, many people would prefer to know they have emergency access to the monies they have overpaid.  

Regards, Liam


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## Slim (18 Jun 2009)

Kate10 said:


> My husband and I sat down to go through the household budget last night and discuss fixing. We've decided to fix for 4 years at 3.57% (currently on AIB standard variable of 2.25%).


 
I think you are absolutely spot on in what you are doing. It is a good rate and if it gives you peace of mind and a comfort for the next 4 years, it is worth it. In truth, few of us make any use of the saving as rates fall but immediately feel the pain when rates rise. Good luck. Slim


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## NorfBank (18 Jun 2009)

Kate10 said:


> I think it really depends on your personal financial circumstances.



Wise words, it looks like it makes sense for you to fix Kate due to your own circumstances.

I will not be fixing even though some of the rates are quite attractive. Instead we fixed the rate ourselves but kept our .75% tracker by fixing our repayment at 5% thus we have been overpaying the mortgage since rates started to fall. 

If people are worried about rates rising, why not just overpay at the 5 year fixed rate of 3.86% but keep your tracker. You will gain by paying off some of the capital while the rates are low and when rates increase you will not suffer a financial shock unless of course rates rise for an extended period. As we live in a boom and bust world, personally I think there are too many variables for this to happen.

I take Liam's point on overpaying on negative equity but we bought a house for life (albeit at the top of the market) and want the mortgage paid off as soon as possible plus if you have made overpayments and things get sticky, the lender will take this into account.

Other people will say when rates are low you should put the overpayments into a high rate savings account so you have accessibility and if you wish you can pay back lump sums. Me, I would not have the discipline for this. A blow out holiday would be just too easy!


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## Soarer (18 Jun 2009)

Kate10 said:


> My husband and I sat down to go through the household budget last night and discuss fixing. We've decided to fix for 4 years at 3.57% (currently on AIB standard variable of 2.25%).
> 
> We thought about all the arguments set out on this thread, and considered saving the difference instead, but ultimately decided that 3.57% is a rock bottom rate. We would have taken your hand off for it at the beginning of last year. I think rates will start to come up by the beginning of 2010. We have a very big mortgage, and my husband has had a 10% salary cut. If rates go above 4.2% we are in trouble. We decided to take the pain now for some security down the line. Our broker agrees and doesn't make a cent from our decision by the way, as we are staying with the same bank!
> 
> I think it really depends on your personal financial circumstances.


 
Hi Kate.

Doing a bit of snooping on the fact that you're fixing for 4 years @ 3.57%, I reckon you're currently with AIB. Is switching an option for you?
The reason I ask is, Bank Of Ireland are offering a 5 year fixed rate of 3.3%. 
Details can be found here :[broken link removed]

So with them, you're getting an extra year's peace of mind, and you're also saving €22.50 per month on every €100,000 borrowed when compared to the 3.57% rate.

Hope this helps, and congratulations on your decision.


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## NorfBank (18 Jun 2009)

Soarer said:


> So with them, you're getting an extra year's peace of mind, and you're also saving €22.50 per month on every €100,000 borrowed when compared to the 3.57% rate.



..or maybe an extra year paying a fixed rate just as rates begin to fall again. Who knows?


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## Soarer (18 Jun 2009)

NorfBank said:


> ..or maybe an extra year paying a fixed rate just as rates begin to fall again. Who knows?


 
Maybe they shouldn't fix at all so?

And round and round it goes!


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## annR (18 Jun 2009)

Without crunching the numbers at all, I would never go with a fixed rate as it's been set by the bank who just wants to get more interest out of you  - I don't see how the mortgage holder can win.  If it's security and peace of mind you're after - agreeing to pay a fixed rate is a very expensive way of doing it when you could just be disciplined and save the money.  I don't really understand how people find it psychologically easier to fork out extra interest to the bank than setting up a regular savings.


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## Bronte (18 Jun 2009)

LDFerguson said:


> If someone fixes now for three years and pays a margin of 1% or more over the variable rate for the fix, they're paying 1% extra immediately. If variable rates don't start going up until mid-2010, as some economists believe, they've paid a 1% premium for security for a year. If rates creep up in quarter percent increments that the ECB tends to favour, they may never recoup what they've lost.
> 
> m


 
I know you pay a premium, if you're lucky you won't but what price the security of the fixed.  Also what if rates go really high, you'd be more than overpaying then.  People shouldn't forget that.  

Other points

Kate 10's reason for fixed is a very good example of when to fix, in her particular case she can't afford to pay over 4% so fixing for her is the right thing now.

I think people who are not disciplined with money and who are in or close to negative equity should pay off as much as possible because they more equity they have the more room for manoevre they have.  The banks are 'being nice' currently but if they have a capitive market of people in negative equity unable to move institutions that creates a monopoly situation for the banks.  Never trust the banks especially when they are in control.


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## TRipley (18 Jun 2009)

I agree with annR's response, if you are spending energy worrying about the fix / no fix decision why can't you be disciplined enough to stay variable and put the balance to a fixed rate to one side?


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## NorfBank (18 Jun 2009)

Bronte said:


> Also what if rates go really high, you'd be more than overpaying then.




Rates could go really high but going on past performance it seems unlikely. 
See here for the ECB rates since 1999. The highest they have been is 4.75%. Of course past performance is no guarantee of future results.


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## irishlinks (18 Jun 2009)

Soarer said:


> Hi Kate.
> 
> Bank Of Ireland are offering a 5 year fixed rate of 3.3%.
> Details can be found here :[broken link removed]
> ...



That BOI fixed rate is actually 3.99%  (The APR they use is 3.3) . It's better to compare actual rates not APR when comparing fixed rates. 


Money Guide Ireland


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## Soarer (18 Jun 2009)

irishlinks said:


> That BOI fixed rate is actually 3.99% (The APR they use is 3.3) . It's better to compare actual rates not APR when comparing fixed rates.
> 
> 
> Money Guide Ireland


 
Sorry if I mislead anyone!

So even though they state 3.3%, they are actually charging 3.99%? How can they do that? Do the figures in the link I posted mean nothing?


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## NorfBank (18 Jun 2009)

Soarer said:


> So even though they state 3.3%, they are actually charging 3.99%? How can they do that? Do the figures in the link I posted mean nothing?




Banks have to state the APR on loans as it supposedly makes it easier for consumers to compare rate.
It doesn't, it makes it easier for banks to confuse consumers for their own benefit.

Most banks give the nominal rate and the APR but BOI only publish the APR which to me is quite sneaky.


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## HelloWorld (18 Jun 2009)

What happens once the Fixed term has passed?

We are looking at taking a mortgage with AIB (pending approval) and are thinking of starting with a Fixed mortgage for 2 years.
When the 2 years has passed, do they generally offer competitive rates (and choice of Variable or further Fixed) to move onto, or will we be forced to accept whatever rates AIB throws at us for the remainder of our mortgage?


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## NorfBank (18 Jun 2009)

You usually get a choice of fixed or variable as available.


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## contractor (18 Jun 2009)

AIB have increased their 3, 5 and 10 year fixed rates: article.  Surely that means time to fix or is that just what they want us to think?

And seeing as the tracker mortgage (and indeed the standard variable if you are with AIB) is no more, does it make sense to stay with a tracker mortgage no matter what?


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## boe (18 Jun 2009)

Kate10 said:


> My husband and I sat down to go through the household budget last night and discuss fixing. We've decided to fix for 4 years at 3.57% (currently on AIB standard variable of 2.25%).
> 
> We thought about all the arguments set out on this thread, and considered saving the difference instead, but ultimately decided that 3.57% is a rock bottom rate. We would have taken your hand off for it at the beginning of last year. I think rates will start to come up by the beginning of 2010. We have a very big mortgage, and my husband has had a 10% salary cut. If rates go above 4.2% we are in trouble. We decided to take the pain now for some security down the line. Our broker agrees and doesn't make a cent from our decision by the way, as we are staying with the same bank!
> 
> I think it really depends on your personal financial circumstances.


 
Kate10, can I just ask if you are currently on a tracker or a standard variable rate mortgage because that rate of 2.25% is way below what I am currently being offered by AIB. I have sold my house and am paying off the mortgage I have with FA with the proceeds. We have bought a new house and are taking out a mortgage with AIB. They are offering a variable of 2.65% which is a fir bit higher that your standard variable


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## Bronte (18 Jun 2009)

NorfBank said:


> Rates could go really high but going on past performance it seems unlikely.
> See here for the ECB rates since 1999. The highest they have been is 4.75%. Of course past performance is no guarantee of future results.


 
It seems unlikely based on past performancy but as we have a global financial meltdown all bets are off.  

A high of 4.75 could be a rate to customers of minimum say 5.75  depending on the banks margin and this is easily a doubling of many people's current rates.  One of these days when the storm has died down the banks in Ireland/UK are going to start increasing their margins to claw back their current losses.  But I'm no economist.


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## irishlinks (18 Jun 2009)

boe said:


> Kate10, can I just ask if you are currently on a tracker or a standard variable rate mortgage because that rate of 2.25% is way below what I am currently being offered by AIB. I have sold my house and am paying off the mortgage I have with FA with the proceeds. We have bought a new house and are taking out a mortgage with AIB. They are offering a variable of 2.65% which is a fir bit higher that your standard variable



AIB rates for new customers are dependent on the LTV (Loan versus House Value). Under 50% gets you 2.25%. Over 80% gets you 2.65%


Money Guide Ireland


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## moyno (18 Jun 2009)

I have a standard variable rate of 2.25% with AIB but am in lovely negative equity land (I got a mortgage before they introduced the different rates for different LTV'S). I am not going to lose this for a fixed rate as I guess my LTV will still be a shocker in 2-3 years so I will be giving up a good rate for nothing. My sister is fixing on the other hand as her variable rate is very poor and she wants security in the knowledge that her mortgage outgoings will be x each month.


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## so-crates (18 Jun 2009)

Personally I'd be very reluctant to fix at any time but that is not an absolute position. Reasons why I wouldn't fix are the lack of flexibility in changing my mortgage and the premium required. Those reasons never really change. Reasons to fix would be the need for an assured repayment amount. That would be my primary consideration. I would consider at the moment whether it is worth fixing since ECB rates are low but personally I don't think I would be a winner, I think the bank would be. While I acknowledge that you are more likely to get a good fixed rate now - I think that reflects an interpretation, a gamble on the part of the bank that rates are not likely to rise at a steep rate in the next two years. I would tend to agree with them - there does not appear to be a significant likelihood of inflationary pressure encouraging the ECB to raise rates quickly within the next year or two years. For me it would mean a loss of the tracker rate, immediate payment of a higher mortgage interest rate and limitations on capital overpayment (which I am currently taking advantage of the low rate to increase this). For me these outweigh any benefit I might acquire from an increase in ECB rates within the next two to five years. However when I first got my mortgage I stress tested the repayments by a sizeable margin so I know that they are affordable even with a sizeable jump in the base rate, if I had not that comfort of affording a bigger repayment if needs be, the incentive to fix would be much greater - a reflection of a requirement for certainty.


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## Toby (26 Jun 2009)

We're on a tracker and paying 1.85% at the moment I believe. Our mortgage is about 25% value of house - would you recommend fixing?


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## so-crates (27 Jun 2009)

Have you a reason to want to fix?


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## Robin Banks (28 Jun 2009)

Toby said:


> would you recommend fixing?


 
keep the tracker, its the closest thing to free money you're ever likely to get.


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## minion (28 Jun 2009)

Robin Banks said:


> keep the tracker, its the closest thing to free money you're ever likely to get.



I agree.  Its actually better than free money.  You can make money out of it 

I have mortgages left on only 2 properties. I changed them to trackers at ECB +0.8% on them a few years ago.
I couldnt be bothered paying them off now because the money makes more on deposit.  When that changes i'll move it from deposit to eliminate the mortgages altogether.


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## so-crates (29 Jun 2009)

Toby, the only reason to want to fix is that you need to know exactly what your outgoings are in a given month - if you do not need that certainty I wouldn't, you would be unlikely to gain. The banks will set a rate that will be higher than your current rate and will probably include some leeway for them in terms of rate rises over the term of the fixed period. You would also probably not come out of the fixed period back onto a tracker mortgage.


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## so-crates (29 Jun 2009)

Robin Banks said:


> keep the tracker, its the closest thing to free money you're ever likely to get.


 
 you've got to love it when a person called robbin' banks talks about free money!


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## csirl (30 Jun 2009)

Its interesting that many people regard a fixed rate mortgage as been appropriate for people who's finances are tight. The reality is that a fixed rate mortgage is a luxury product and it is the tracker that is the no frills product.

When you take out a fixed rate mortgage, you are paying the bank to take the interest rate movement risk away from you. Paying someone to take a financial risk is usually more expensive than the value of the risk. So, as a general rule, people with fixed rate mortgages will pay significantly more in repayments. 

Fixed rate mortgages should be for people who are wealthy enough that they are willing to pay for the privilege of not having to bother with monitoring their interest rate!


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## so-crates (30 Jun 2009)

I'd agree that fixed rate mortgages are an indulgence, the only reason I can think of to go on one is that you want to know what the payments will be for a fixed period of time (you'll note that I didn't mention anything about tight finances ). Personally I wouldn't fix unless I really, really needed that certainty (say I was going abroad for two years and wanted to be able to plan out repayments).


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## Caveat (30 Jun 2009)

csirl said:


> Fixed rate mortgages should be for people who are wealthy enough that they are willing to pay for the privilege of not having to bother with monitoring their interest rate!


 
But they can also be for people for whom finances are tight enough for them to want to insulate themselves against any unexpected hikes in interest rates over, say, the next 5 years.


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## csirl (30 Jun 2009)

But, if finances are tight then surely they wouldnt be able to afford the extra that a fixed rate mortgage costs?


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## Caveat (30 Jun 2009)

Yes, but on a variable, interest rates could quite easily increase sufficiently over a 5 year period to exceed the repayments of a 5 year fixed couldn't they?

I know what you mean in that it could well be a struggle for some (and unnecessarily so) but for these poeple, the security is probably worth it in the long run.


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## minion (30 Jun 2009)

Caveat said:


> Yes, but on a variable, interest rates could quite easily increase sufficiently over a 5 year period to exceed the repayments of a 5 year fixed couldn't they?
> 
> I know what you mean in that it could well be a struggle for some (and unnecessarily so) but for these poeple, the security is probably worth it in the long run.




But lok at all they people complaining about being stuck on a fixed rate now.  They all think they have been conned and that the bank screwed them.


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## Caveat (30 Jun 2009)

minion said:


> But lok at all they people complaining about being stuck on a fixed rate now. They all think they have been conned and that the bank screwed them.


 
Yeah, well I'd rather not look at them thanks. No pleasing some people.

They're the kind of people who on grand national day would go on endlessly about the horse that "they *should* have backed"


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## Toby (4 Jul 2009)

Thanks, we've decided not to fix, reckon the tracker we have is worth holding onto long term as switching to fixed might save us a bit if rates shoot up now but after the fixed term ended we would have little control over what rate we were forced to pay. So, we might have a few tough years if rates shoot up but in the long run the tracker seems the safest option.


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