Choosing the best long-term value mortgage lender?

I strongly advise against taking out a mortgage with Bank of Ireland or permanent tsb as their rates for existing customers are much higher than for new customers.

I advised that Finance Ireland and Avant were clearly the Best Buys. But now Finance Ireland has gone from the top to the bottom of the Best Buys table. If you took out a 10 year fixed rate with Finance Ireland, then this isn't very worrying. But if you took out a three year fixed rate, then you may find yourself with expensive rates when your fixed rate ends.

As I understand it, Finance Ireland and ICS are financed on the money market and so are vulnerable to rate increases.

Avant and AIB are funded by deposits, Spanish customers' deposits in the case of Avant.

Does this make them more likely to be better value in the long-term?

If you take out an Avant fixed rate for 15 or 20 years, then it doesn't really matter, as long as they don't push up their rates before you draw down.

The Finance Ireland sudden and significant rate increases show how important it is to apply to a few lenders at the same time. If you rely on just one lender, and they raise their rates before you draw down, then you could be left stranded.

Brendan

Id say Avant is very good. The danger now of course is that as money market fixed long term rates are high paying down the mortgage before the term ends could get expensive. Those that fixed long when market rates were 1/2 % must be laughing.
Boi still isnt that bad, they are 3.3 fixed for 10 and with 3% cash back thats 3% for 10 years, a real steal if you think today mortgage rates are 6%+ in the States. People have been stress tested to past 6%so 3%should be quite affordable. The rate is less than what Greece is borrowing at! Aib is 3.2 for 10 without cashback afaik. If taking out a mortgage today I would personally like to fix for 15 or 20 with early repayment options so FI and Avant offer the 10% of balance

Brendan Burgess said:

The Finance Ireland sudden and significant rate increases show how important it is to apply to a few lenders at the same time. If you rely on just one lender, and they raise their rates before you draw down, then you could be left stranded.

Brendan

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This is what’s now happened in my case. The broker only advised applying with Finance Ireland as Avant application times were getter longer and more complex.

I think I am going to bite the bullet and apply with Ulster on a 10 year fixed at 2.8%.

lexio7 said:

This is what’s now happened in my case. The broker only advised applying with Finance Ireland as Avant application times were getter longer and more complex.

I think I am going to bite the bullet and apply with Ulster on a 10 year fixed at 2.8%.

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Ulster Bank are leaving the Irish market so I doubt are taking on any new business.

Sorry I should have mentioned my mortgage is currently with Ulster Bank.

Why be concerned about the potential PTSB or BOI rate waiting for you at the end of your 5 or 7 year fix? You can always switch provider again

Hi Sleve

People often go for an expensive lender such as BoI or ptsb with the intention of switching, but they end up stuck with that lender and paying far more over the term of the mortgage:

1) A lot of people can't switch. A lot can happen in 5 years.

• Your credit rating gets hit because of an overlooked credit card payment.
• You change jobs
• Your income reduces because you cut back work to focus on the family
• You find mica in your home
• You split up and can't agree anything

Paul F has an even longer list of reasons here.

2) Even if you can switch, most people aren't organised to do so.

• The legal costs are €1,500 up front
• They delay because of the variety of options
• They can't get all their paperwork together - especially for the self-employed
• They are just too busy raising children and working to allocate the headspace to switching

So you are better off avoiding the likes of Bank of Ireland and permanent tsb and choosing a lender which appears to offer long-term value.

Brendan

lexio7 said:

Sorry I should have mentioned my mortgage is currently with Ulster Bank.

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As is mine. I recently fixed for 5 years with them for 2.2%. It looks like it will be switched to PTSB in the near future so depending on if I get classified as a new or existing customer when my fixed rate is up, will determine if I switch or not. However as Brendan outlined above, that is always not possible so best to make the decision now (if possible) to go to a lender will better long term rates.

The larger issue is that picking a lender today doesn't mean you are with that lender tomorrow. Just look at the Ulsterbank situation where PTSB are buying the mortgages, leaving people with IMO the worst lender on the market.
Until the full term fixed rates become more the norm, and more affordable, you really are at risk of things being drastically different at another point in the mortgage term.

lomber said:

The danger now of course is that as money market fixed long term rates are high paying down the mortgage before the term ends could get expensive.

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It's true that if you switch to a lender now and they don't allow penalty-free overpayments, making an overpayment (or breaking out of the fixed rate entirely) could entail a large penalty over the next few years. That will be the case if interbank interest rates fall between now and when you want to make the overpayment. On average, the penalty in such cases is higher the longer you fix for.

That means that, whenever possible, you should choose a lender that allows large penalty-free overpayments if that is your plan. This thread details the overpayment flexibility offered by each of the lenders:

And if you are planning to move home in the next few years and that is deterring you from switching to a long-term fixed rate now, note the following:

• All of Avant's rates, and Finance Ireland's 10-year and longer fixed rates, allow you to avoid any potential break fee if you move home in the future (as long as you take out a new mortgage with them, and subject to certain conditions)
• And in the case of Finance Ireland you can "take your mortgage with you" – meaning that you get to keep the same interest rate when you move (again, subject to certain conditions)

Brendan Burgess said:

Hi Sleve

People often go for an expensive lender such as BoI or ptsb with the intention of switching, but they end up stuck with that lender and paying far more over the term of the mortgage:

1) A lot of people can't switch. A lot can happen in 5 years.

• Your credit rating gets hit because of an overlooked credit card payment.
• You change jobs
• Your income reduces because you cut back work to focus on the family
• You find mica in your home
• You split up and can't agree anything

Paul F has an even longer list of reasons here.

2) Even if you can switch, most people aren't organised to do so.

• The legal costs are €1,500 up front
• They delay because of the variety of options
• They can't get all their paperwork together - especially for the self-employed
• They are just too busy raising children and working to allocate the headspace to switching

So you are better off avoiding the likes of Bank of Ireland and permanent tsb and choosing a lender which appears to offer long-term value.

Brendan

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Both yourself and Paul's reasoning is well-taken and appreciated. However, it's worth acknowledging that this is just another variation of crystal-balling. It's already consensus, on this here forum, that mortgagees should make their own assessment of risk when it comes to fix duration/future market rates, and I reckon the same goes for future switching capacity and vendor selection.

Life is most certainly unpredictable, but I can look at that list of reasons and make a judgement about how likely they are to apply to my household in 5-10 years. It's also an open question whether today's expensive lender will continue to be so in 5-10 years, though obviously there is a lot of inertia in these institutions.

With that in mind, selecting a better rate is a perfectly rational choice if one is comfortable assuming a certain risk of future disadvantage, using a heuristic like: P (risk of future disadvantage)= P (risk of inability to switch after fixed term) * P (risk that your vendor is considerably more expensive than alternative). Not that anyone could or would put real numbers to that of course.

I appreciate that you're not making any pronouncements from on high, and it may be true that it's good blanket advice for the median mortgagee, but IMO it's just one more set of variables that need to be hashed out on a case-by-case basis

@Sleve McDichael I agree with some of your points but cashback offers make it really hard for the vast majority of people to choose the best-value mortgage. My savings estimates in the switcher thread show that Permanent TSB is only sometimes the best value, even over the next four or five years. And Bank of Ireland are virtually never the best value over that timeframe. It's almost impossible for most people to do the calculations that are needed to see that.

And then there is the issue of Permanent TSB and Bank of Ireland discriminating between new and existing customers in relation to the interest rates offered. I would go so far as to say that many borrowers don't realise this, and even if they do they might overlook the cost and hassle of switching again in five years (because they might be in the middle of house-hunting when taking out their PTSB/BOI mortgage and their minds are elsewhere).

Paul F said:

@Sleve McDichael I agree with some of your points but cashback offers make it really hard for the vast majority of people to choose the best-value mortgage. My savings estimates in the switcher thread show that Permanent TSB is only sometimes the best value, even over the next four or five years. And Bank of Ireland are virtually never the best value over that timeframe. It's almost impossible for most people to do the calculations that are needed to see that.

And then there is the issue of Permanent TSB and Bank of Ireland discriminating between new and existing customers in relation to the interest rates offered. I would go so far as to say that many borrowers don't realise this, and even if they do they might overlook the cost and hassle of switching again in five years (because they might be in the middle of house-hunting when taking out their PTSB/BOI mortgage and their minds are elsewhere).

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All true. I would only recommend it to people like myself who do spreadsheets for a living and are comfortable spending a few hours making a little table that discounts all the rates relative to solicitors fees, cashback amortised over the fixed length, etc.

Sleve McDichael said:

All true. I would only recommend it to people like myself who do spreadsheets for a living and are comfortable spending a few hours making a little table that discounts all the rates relative to solicitors fees, cashback amortised over the fixed length, etc.

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Exactly – very much a minority sport.