Advice re switching mortgage

Hi all,
I am sorry about this question as I know you have heard it many a time...
Mr Bear and I are in the process of switching our mortgage with a broker, they have come back with 2 options see below...

With AIB the rate would be:

• 0.45% above ECB (4.45%) in year one
• and 0.75% above ECB (4.75%) in year two and for remaining term

Please also note BOS offer very competitive fixed rates they would be:

• 2/ 3 year fixed @ 4.84%
• tracker rate would be 0.70% above ECB

The thing is the AIB offer looks great however we are stretched as is at 5% (we are currently EBS 1% above ECB), I know the interest rates are going up once, but is it my imagination that there could be 2 rate rises before the year is out...If so for us the cheaper option wold be to fix...

Any advise would be appreciated....
P

In my amateur opinion...

... if, after allowing for any budgeting/cost cutting measures that you can reasonably afford, you are still stretched at 5% then you probably should consider fixing to give yourself some peace of mind and predictability for the next few years. Obviously you should apprise your self of the implications of fixing (e.g. inflexibility, most likely penalties if you break the fixed rate period by remortgaging/moving/attempting to make accelerated campital repayments etc.). Your broker should be going over the pros and cons with you too.

I tend to agree with ClubMan's response, but there is another option you could consider: you could have a split rate, i.e. fix the bulk of the mortgage (maybe 60 to 75 percent of it) and leave the rest on a tracker rate. That leaves you with a fairly good level of predictability on your payments, but increases your flexibility - if your incomes go up or you have a small windfall, you can pay extra off the tracker portion of the capital. I don't know if those specific lenders do split rates like that, but there's no harm in asking...

Thanks DreamerB and Clubman, the reality is that we are pretty stretched at the moment with the 5% interest payment and have no plans to move from where we are for the forseeable future.. Chatting to Mr Bear I think we'll fix for 2 years..And reassess then
Many thanks for the input guys..
P

i think u should also check out nib which have ecb+0.5 ( brokers don't sell this product) with ltv (loan to value ratio) less than 50 %.
with current ecb rates of 4 per cent, their apr works out at 4.61.
however as the other participants pointed out, if you think you are already stretched with ur current rate, then i would go for the 2 year fixed

we dont have ltv < 50% and besides from what I have read on AAM they are tediously slow...
Any way on a brighter note, I refered my mum onto the broker for something she needed to get done, and they have just informed me that as a mark of gratitude they will pay our legal fees for switching!! As both offers do not include legal fees!! How cool is that