30 v 20 year mortage Term.

[Protocol]

However wage inflation can be a different matter. Wage inflation in Ireland from Q4 2019 to Q4 2020 was 4.8% see here https://www.cso.ie/en/statistics/earnings/earningsandlabourcosts/

At the individual level many people have increased earnings as they age due to promotions etc.

This points to the idea that the burden of repayment falls as the years go by.

The possibility exists that inflation as measured by consumer prices will not be as low over the next 20/30 years as it has been over the last 20. This would increase nominal wages but not nominal mortgage balances. That would make deferred payments less of a burden.

So I suggest that wage inflation, and possible price inflation are reasons to consider extending a mortgage term as long as possible.

Be careful here.

Recent wage inflation may be partly due to compositional effects.

COVID has hit low-paid workers more.

As they drop out of the labour force, average earnings rise, even if everybody else remains on the same wage as before.

 

[SPC100]

For completeness, by law every lender must provide flexibility to overpay, but may charge a break fee for early payment during a fixed rate period.

Those that allow overpayment without breakfee:
BOI: allow regular overpayment of the higher of 10% of normal repayment amount, or 65 euro. Not lump sums.
Ulster Bank: 10% of the fixed balance each year, by regular payment or lump sum.
KBC: cumulative 10% of the fixed balance during the fixed term.
Finance Ireland: 20% of the balance in 12 month period, by lump sum only.
Avant: 1% of the fixed balance per year.

And those that don't allow overpayment without calculating break fee:
AIB
EBS
PTSB - however, with PTSB if you make an overpayment, but don't tell them to either reduce term or amount, my understanding is that no break fee is triggered. This is a 'process' so I wouldn't place reliance on it.

Interestingly, as the topic is about longer or shorter terms, most of the lenders will allow you to contractually shorten the term without triggering a break fee calculation. So you end up overpaying every month, but you're signing up to that permanently.

Mods - this should be a key post on its own!

Thanks for great summary Red.

I didn't know about the contractual option you mentioned.