AIB mortgage- fixed or variable rate?

H

HouseBuyer10

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Our AIB mortgage interest rate will expire soon and we have a choice between variable (the lowest) and fixed?
I know it’s difficult to predict what will happen in the next years, but if you’ve had to make this choice recently, what did you go for?

If we were to fix, what would be the best choice: 1, 2, 3 or 5 years?

Many thanks.
 
This is a very difficult question at the best of times. The irrational pricing behaviour of Irish mortgage lenders makes it even more difficult.

This is my best guess and it's only a guess.

You don't tell us your LTV but here are the LTVs for AIB for 50% to 80%.



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ECB rates appear to have peaked and are expected to fall.

So, all these rates should fall.

But it's odd that the variable rate of 3.95% is lower than the ECB rate of 4.5%.

It's also odd that when rates are expected to fall, that variable rates should be lower than fixed rates.

I don't see any of these rates rising. So I see no point in fixing.

Therefore, go for the variable rate.

Repeat: This is only a guess.

Brendan
 
Other factors to consider:

If a rise in rates would cause you great discomfort, then maybe the insurance of fixing is appropriate for you.

If you might overpay your mortgage or trade up in the future, this would suggest a variable rate.

Brendan
 
Brendan, thanks so much for your advice. It’s very much appreciated.
We’re very tempted to go with the variable rate as it’s so low but we’re also considering fixing for a year or two and hope that fixed rates would go down in the meantime. However, if there is another major event that affects the EU finance landscape in the near future, then 1-2 years may not be a good solution at all.
Our LTV is <50%.
I assume that we can go with the variable rate and fix at any point if needed without having to pay a breakage fee, can’t we?
 
HouseBuyer10 said:
I assume that we can go with the variable rate and fix at any point if needed without having to pay a breakage fee, can’t we?
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This is correct.

On where rates might go... The banks didn't pass on all the rate increases so even though the ECB rates are expected to fall I can see the banks being very slow to lower any of their mortgage rates.

If I were a sneaky bank I might lower my fixed rates in line with market developments but increase my variable rate ( we kept them as low as we could for as long as I could etc.). They could claim cheaper rates (on fixed mortgages) but ultimately increase income as (I think) most mortgages are variable.

Brendan's follow up post is the key point for me. Only speculate on rates if you can afford to lose. If you think you might be inset stretched should variable rates move in the wrong direction why risk your home.
 
One of my long standing bugbears for all the years I worked in the bank was the fact that customers were forced in to making the 'full duck or no dinner' choice. Fixed or variable. I failed to convince them to offer borrowers a choice of fixing a portion of the mortgage rate and leaving some element on variable. Would eliminate this dilemma borrowers have at either the start of the mortgage or when their current fixed rate expires. So in essence my suggestion to split the borrowers mortgage in to 2 or even three accounts, and place a percentage (exact split to be decided by the borrower) of same in the variable and fixed rate options. Would provide an element of protection/security to those nervous about locking in the full mortgage at a fixed rate.
 
Bank Manager said:
One of my long standing bugbears for all the years I worked in the bank was the fact that customers were forced in to making the 'full duck or no dinner' choice. Fixed or variable. I failed to convince them to offer borrowers a choice of fixing a portion of the mortgage rate and leaving some element on variable. Would eliminate this dilemma borrowers have at either the start of the mortgage or when their current fixed rate expires. So in essence my suggestion to split the borrowers mortgage in to 2 or even three accounts, and place a percentage (exact split to be decided by the borrower) of same in the variable and fixed rate options. Would provide an element of protection/security to those nervous about locking in the full mortgage at a fixed rate.
Click to expand...
Actually AIB have them but only for new customer. Presumably because it is easier to manage when they set up new borrower account (i.e. create two account essentially) where as existing borrower can get messy with traceability and changing of balances etc to move a portion to another account.

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Link

I used this arrangement myself. I started off with a portion fixed and a portion variable. Over time, due to the way AIB calculate ERC [early repayment charge] for fixed rate (This was when the green rate was still very low), I made both fixed now but they are still two separate accounts.


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Link

BoI seems to have it too based on the above.
 
First time buyers hoping to drawdown mortgage soon and we decided to go with AIB variable for mortgage. Putting down just enough savings to get us to <80% LTV - saved a good bit during covid. Choose variable rate as we:
- Hope to use leftover savings to cover works on house to get us to B2 at which point we can fix at green mortgage rate
- May inherit from deceased relative in coming months and variable rate will allow us to pay down a chunk if that happens
- Can afford to pay higher repayments if variable rate does increase
- And its an attractive rate
 
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