BoI to cut fixed mortgage rates

It looks like rates are finally pretty reasonable in Ireland.

A 5-year fix at 3.45% for those with a LTV of less than 80 per cent isn't too bad when taken in conjunction with their 2% cashback offer, reducing the effective rate to about 3.05%.

A lot of complaints in recent years drew comparisons with banks operations in Northern Ireland when compared to the Republic of Ireland. An 80% LTV mortgage with Bank of Ireland UK costs 3.33% at the moment and the cheapest 5-year fix is 2.99% at 75% LTV.

With Ulster Bank in Northern Ireland, a 5-year fix, with no arrangement fee, costs 2.9% (60% LTV), 2.98% (70% LTV) and 3.35% (80% LTV).

There isn't even too significant a difference between this and the best-buy rate in the UK (for fee-free mortgages) of 2.39% with HSBC (who have a reputation for being an extremely picky lender and only available at 60% LTV).

I realise that sterling and euro are two different currencies and, all else being equal, it should be cheaper to borrow euros. However, given the extremely competitive nature of the UK, I think we're very close to being in a position where we can no longer complain about Irish banks fleecing their customers.

The rate you revert to in the UK also tends to be higher - although very few customers with any sense remain on the SVR.
 
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So, Bank of Ireland now have some of the best fixed rates, and still about the worst variable rates. Strange.
 
WorstPigeon said:
So, Bank of Ireland now have some of the best fixed rates, and still about the worst variable rates. Strange.
Click to expand...

Not really. Richie Boucher has stated that BoI are deliberately trying to encourage borrowers to opt for fixed-rate mortgages to mitigate default risks posed by future interest rate increases. A more cynical view is that BoI are anxious to tie customers into longer term contracts.
 
I am a BOI variable rate customer and don't want a fixed rate as I need flexibility.BOI just want to lock people in despite interest rates on downward projection.
I feel it's better to wait another few months for further reductions.
 
Clonback said:
I am a BOI variable rate customer and don't want a fixed rate as I need flexibility.BOI just want to lock people in despite interest rates on downward projection.
I feel it's better to wait another few months for further reductions.
Click to expand...

That's obviously your call but you are paying a pretty hefty premium to retain that flexibility.

If I wasn't in a position to switch providers and had no immediate plans to move, then I think I would be inclined to take a two-year fix @ 3.65% rather than sticking with an SVR @ 4.5%. I really don't see any prospect of BOI reducing their SVR at this stage.
 
Sarenco
As posted many months ago I am on 3.6% variable rate so why would I change.
 
Clonback said:
Sarenco
As posted many months ago I am on 3.6% variable rate so why would I change.
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Fair enough, I wouldn't fix either if I was on a 3.6% variable rate. My comment was directed at those borrowers that are stuck on SVRs that are not in a position to switch providers.
 
I wonder will they offer you the 2% cashback on these new fixed rates, if that was the case this would make fixing with them for 5 years and availing of the 2% cashback very attractive indeed.
 
[broken link removed]

Here's the BOI press release and the new rate card for their fixed rate offering.

Interestingly, existing customers can now opt for a 1-year fix -- 3.65% for LTVs over 80%, 3.4% for LTVs under 80%.
 
I'm looking at a mortgage €384k which is a LTV of 80% on €480k over 35 years. Comparing BOI and UB it now seems that BOI is way ahead as they were quite close before.

If I was to fix with BOI for 5 years at 3.45% and get the cash back I would be paying the following:
€1,575.93 x 60 months = €94,555.91
2% cashback of €7680 means paying back €86,875.91 over 5 years or €1,447.93/month.

UB with their 3.35% SVR I would be paying the following:
€1,553.84 x 60 months = €93,230.65
€1500 cashback means paying back €91,730.65 over 5 years or €1,528.84/month.

Saving with BOI is €4,854.75 over those 5 years.

For UB to match the BOI rate they would need to reduce their SVR to 2.96% or else come up with some other cashback offer. It's really hard to look past BOI now.

For completeness, could someone tell me how I would calculate how much principle and interest would have been paid off on each one after the 5 years so I could see how much I would have left to pay with 30 years still to go.
 

Do we think its to mitigate default risks (to the bank) posed by future interest rate decreases?

Also considering the lowest rate is 1yr fixed. It really isn't locking people in for very long. So why encourage people to avoid VR for such a small period.

Perhaps its as suggested by the media, to stop people switching to other banks in the short term.
 
I think it would be naive to think that BoI has no interest in tying borrowers into longer term deals.

However, there is UK data that shows that default rates on fixed rate mortgages are lower than default rates on variable rate mortgages so there may be some justification for BoI's stated rationale for encouraging borrowers to opt for fixed term mortgages.

Also, the interest rate curve is such that BoI can currently hedge its medium term cost of funds at minimal cost.
 
Clonback said:
I am a BOI variable rate customer and don't want a fixed rate as I need flexibility.BOI just want to lock people in despite interest rates on downward projection.
I feel it's better to wait another few months for further reductions.
Click to expand...
Is there really much chance of BoI lowering their variable rates in the coming months?
 
It depends on when the other banks start dropping their variable rates coupled with the timing of Frank and other new entrants.

Interest rates are only going one way for the next 3/4 years and that's why BOI are offering reasonable fixed rates.
 
Clonback said:
It depends on when the other banks start dropping their variable rates coupled with the timing of Frank and other new entrants.

Interest rates are only going one way for the next 3/4 years and that's why BOI are offering reasonable fixed rates.
Click to expand...

Many of the other banks have been lowering their variable rates for a while now. BOI doesn't seem interested.
 
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