Effect of Interest Rate after Fixed Period

lili123

Registered User
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..looking to switch mortgages at the moment, and probably fix for 2 or 3 years at the same time.

If I am happy that I will probably go through the exercise again at the end of the fixed period, how much should I care about run off interest rates?

Tempted by PTSB, given the cashback offer, but obviously over the lifetime (23 years) of the mortgage, they are about €20k-€30k more expensive than KBC's equivalent or even Ulster's 2 year fix (mostly) because of run off interest rates.

But given I "plan" on leaving in 3 years, am I still being hit with the cost of this interest in the Fixed Period? If so, how can calculate this cost roughly?

(PS I did toy with multi switching, but for various reasons decided against it appreciating the potential gain I'm leaving behind)
 
I would avoid ptsb and any of the cash back offers. Most people will not switch after the cash-back period and will be stuck with higher rates.

AIB is the best long-term value in that they pass on rate cuts to existing customers. All the other lenders exploit customer inertia.

Of course, a long-term fixed rate with Avant is also worth considering.

Brendan
 
Thanks Brendan,

Currently with AIB, but on SVR of 2.95%. Completely understand that lenders exploit inertia, but that's not me. I'm the person who changes broadband/electricity suppliers on the day the contract expires every year. So would be changing supplier after the Fixed Period (or before if the sums added up re breakage fee)

Don't want long term fix, as may be moving in 3 to 5 year horizon, so want to re-assess in 3 years.

I just want to understand that even by leaving as soon as the Fixed Period expires, will I still feel an effect of the relatively poor run off rates that apply post fixed period?
 
I just want to understand that even by leaving as soon as the Fixed Period expires, will I still feel an effect of the relatively poor run off rates that apply post fixed period?
But you don't have to switch. You could also pick the best available rate available with your lender. Which is why Brendan suggests avoiding PTSB - they're rates for existing customers are not as good as rates you'll get elsewhere.

If you want to understand the impact if doing nothing, and staying on their SVR, the APR rate will show you that for each lender.
 
Yeah, I get that I don't need to switch necessarily, and switching would carry the costs of €1500 to €2000 at the time. Which if there were no switcher offers in 2023, I would be left paying.

I'm really just trying to quantify any short term penalties in how the interest is calculated etc.

Appreciate the input...
 
If I am happy that I will probably go through the exercise again at the end of the fixed period,

Hi Lili

Sorry, I had read that the opposite way. If you are definitely going to switch, then the run off rates don't matter.

And you usually don't need to wait until the end of the fixed period to switch.

But things can go wrong.

  1. Cash back might be abolished and so you will have to pay your own costs of switching.
  2. The market generally tightens and lenders are no longer looking for switchers
  3. You change jobs and so lenders won't give you a mortgage for a few years
  4. House prices fall and so you don't meet the 80% Loan to Value requirements.,
  5. You mess up on a credit card bill and you have a bad credit record
All are unlikely individually, but sometimes, the unexpected happens.

So you get stuck with ptsb.

I would stay with AIB and make sure you are getting the best rate from them. Or switch to Avant if that pays off.

Brendan
 
Thanks Brendan and RedOnion..

Any precedent or chance of AIB trying to sweeten the deal with me to retain my custom if I call up and say that I'm close to switching away etc?

or are mortgages too heavily regulated for that sort of thing?!
 
Thanks Brendan and RedOnion..

Any precedent or chance of AIB trying to sweeten the deal with me to retain my custom if I call up and say that I'm close to switching away etc?

or are mortgages too heavily regulated for that sort of thing?!
BOI used to do this but haven't heard of AIB offering any retention deal. Give them a ring and see, nothing to lose.
 
BOI used to do this but haven't heard of AIB offering any retention deal.


The reason for this is that Bank of Ireland has default very high rates for existing borrowers. So they have scope to reduce them as part of their mortgage retention plan. AIB's rates are the same for new and existing customers, so I doubt that they will cut specific deals.

Brendan
 
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