EBS or Ulster Bank for 2 Year Fixed?

F

foggydew

Registered User
Messages
4
Hello,

My wife and I are first time buyers and would like some advice. We are looking for a mortgage of €320, 000 and are trying to decide between EBS (3 %) or Ulster Bank (2.3 %) for a 2 Year Fixed. We have been accepted by EBS and are about to apply to Ulster Bank - we have also put down a 10 % deposit on a new build (ready in December)

When I compare the monthly repayments of the two lenders over the two years, we still stand to gain €2165.92 if we go with EBS. This is on account of their 2 % cashback offer and also takes into consideration the €1500 that Ulster Bank offer towards legal fees.

Monthly repayments for Ulster Bank are €1403.56 and for EBS are €1517.48. This would mean more money at the end of the month with Ulster bank, but more cash in hand from EBS - could be put back into mortgage at a later date.

Would it be foolish to go with EBS? By the way, we met them yesterday and asked them could they compete with Ulster Bank's 2.3 % - it was a flat "no"!

One other idea I had was to go with get a one year fixed with EBS and then switch to Ulster Bank next year for two years (assuming the same rate is still on offer).

Thanks.
 
foggydew said:
Monthly repayments for Ulster Bank are €1403.56 and for EBS are €1517.48. This would mean more money at the end of the month with Ulster bank, but more cash in hand from EBS - could be put back into mortgage at a later date
Click to expand...
Ignore the monthly repayment amount, and look at the interest charge.

Over 2 years, EBS works out saving you 420.

The other 1745 is because you're repaying your balance faster with UB at the lower interest rate.
 
I'm in a very similar position. New poster but long time lurker.
Besides hassle, possible breakage fees and solicitor fees, am I correct in saying you could go to EBS, get the 2% cashback and then jump asap to UB for their 2.3% 2 year fixed? You could go to BOI and PTSB and collect 2% off each of them too before going with UB?
 
Last edited:
I always advise clients to go with the option that provides the best long-term value, as you may be stuck with that bank. Here are some reasons why anyone may be ineligible for approval with another bank in the future:
  • If property values go down and your loan to value becomes greater than 90%, then no other bank will consider taking the mortgage on.
  • The initial mortgage may have been approved on the strength of two full-time incomes. If overall household income is reduced in the future for any reason, then you might not qualify for approval with another lender, regardless of having a perfect repayment history.
  • Your incomes may remain fully intact but household expenditure may have increased (growing family size, childcare, car loan, school fees, etc.). This has the same impact as household income reducing, as affordability for mortgages is based on net disposable income.
  • If one applicant changes jobs, then probation would need to be completed before being eligible for mortgage approval. Related, if additional income such as bonus, overtime or commission was important to the original approval, then it would take 1-2 years to prove that this income is being earned in the new job.
  • If one person moves from PAYE employment to being self-employed, it could take 2-3 years before the banks will take any of this income into account.
  • If there are any missed payments or arrears on the mortgage or on any other loans.
  • If interest rates go up (more on that below), then the bar for qualifying to switch the mortgage could be much higher. For example, if you are paying 2.3% for two years, and rates go up to around 3.75% by 2020, then a new bank would want you to demonstrate affordability of repayments at a rate of 5.75%. This would mean that you would need to be saving around €638 per month on top of your mortgage repayments (based on a 30-year term) in order to meet the requirements of the new bank (in reality you could be a couple of hundred euro shy of that target, but the principle remains).
Any short-term strategy is therefore inherently risky, and could backfire.

Perhaps more importantly, rates are widely predicted to go up next year, so the benefit you gain in the first two years could easily be wiped out by higher interest rates charged from year three. If you are not planning to move for a few years, I would strongly recommend that you view the mortgage as the long-term commitment that it is, and set yourself up by going with the best long-term option available.

Another thing to think about is whether you are likely to be able to make any overpayments to the mortgage. Doing so can save far more than small differences in interest rates, or up-front cash incentives. Ulster Bank allows mortgage holders to pay off up to 10% of the opening annual mortgage balance while on a fixed rate without any penalties, whereas you can't to that with EBS (KBC and BOI also allow an element of overpayments without penalties).

Best regards,
Dave Curry (broker)
https://www.linkedin.com/in/davecurryirl
 
Dave_Curry_IMC said:
Perhaps more importantly, rates are widely predicted to go up next year, so the benefit you gain in the first two years could easily be wiped out by higher interest rates charged from year three. If you are not planning to move for a few years, I would strongly recommend that you view the mortgage as the long-term commitment that it is, and set yourself up by going with the best long-term option available.

Another thing to think about is whether you are likely to be able to make any overpayments to the mortgage. Doing so can save far more than small differences in interest rates, or up-front cash incentives. Ulster Bank allows mortgage holders to pay off up to 10% of the opening annual mortgage balance while on a fixed rate without any penalties, whereas you can't to that with EBS (KBC and BOI also allow an element of overpayments without penalties).

Best regards,
Dave Curry (broker)
https://www.linkedin.com/in/davecurryirl
Click to expand...

Earliest is summer 2019 and that's only if inflation is near 2%. I'd take 1 yr rate with cashback now, then march 2019 start submitting your application to switch (unless current provider has the best fixed rates) and see whats on the market.
 
Thank you. That seems like sound advice and there is indeed a possibility of changing jobs.

I suppose it's finding the mortgage to suit the situation. With that in mind I am thinking about Ulster Bank's four year fixed.
 
You must log in or register to reply here.
Back
Top