Fix for 7 or 10yrs?

B

bluecat

Registered User
Messages
15
Hi, I posted recently about switching and got some great advice here. The application is in progress (Avant), and I need to decide on how long to fix for and looking for advice again please.

It'll be a 15yr mortgage (130k) and I'm looking between fixing for 7yrs at 2.05% or 10yrs at 2.2%. Is 10yrs very long to fix for on a 15yr loan? Or are we likely to get a better/as good a rate at the end of a 7yr fix? Have been on over 3% for years with PTSB, so either of these is looking like a big improvement!
 
Nobody know what the future holds but this is what the past looks like.

https://www.*****************.com/wp-content/uploads/interest-rates-in-ireland-over-time.png

I am currently remortgaging and fixing with Avant for 7 years, but I plan to pay off mortgage in 7 years. In your position, I would be asking myself what my outstanding loan value would be after 7 years and stress testing it against various points on the chart above.

Chart not showing so you'll have to put up with Table below.

Irish Mortgage Interest Rates since 1975​

The highest rate reached in each year is shown below – based on the average rates of “representative building societies” from the Central Bank and the CSO

YearHighest Mortgage Interest Rate
197512.5%
197613.95%
197713.96%
197814.15%
197914.15%
198014.15%
198116.25%
198216.25%
198313%
198411.75%
198513%
198612.5%
198712.5%
19889.25%
198911.4%
199012.37%
199111.95%
199213.99%
199313.99%
19947.49%
19957.00%
19966.75%
19976.9%
19985.85%
19995.6%
20006.09%
20016.9%
20024.7%
20034.2%
20043.49%
20053.65%
20064.86%
20075.46%
20085.86%
20094.16%
20104.02%
20114.42%
20124.33%
21034.38%
20144.2%
20154.05%
20163.61%
20173.44%
20183.21%
20193.02%
20202.92%
20212.8%
 
Thanks for posting that, very interesting to see. I will have to try work out what the balance would be after 7 years and think about it from there. While we will (for now) be able to pay extra on the repayments, I don't actually want to change it to a shorter term for now, so we're probably looking at at least 12 more years with the mortgage.
 
bluecat said:
It'll be a 15yr mortgage (130k) and I'm looking between fixing for 7yrs at 2.05% or 10yrs at 2.2%. Is 10yrs very long to fix for on a 15yr loan?
Click to expand...
This is kind of like asking how long is a piece of string. It depends on your circumstances and needs

In general it makes sense to fix for long if a) mortgage is a high share of income and income unlikely to rise; b) there is very little chance of you moving and having to pay a breakage fee.

So how much are mortgage payments as a share of your household income right now? What are the chances you'll want to move house in the next 7 years? In the next 10 years?
 
NoRegretsCoyote said:
This is kind of like asking how long is a piece of string
Click to expand...

I do realise that, sorry. Just trying to sound it out in my head really, and looking to see what others would do (you can probably tell this is my first time switching!)

Currently repayments are about 25% of income. Am on a pay scale and probably have maybe 4 increments left, so income is almost as high as it will get (and won't be changing jobs). As for the house/moving, barring any sort of extreme circumstances, I don't see us moving, we're settled and happy here, so will most likely see out the remaining 15yrs of the mortgage here.
 
To start with I don't have a definitive answer. Both are good options as it stands today. A 7 year time horizon is just too long into the future.

As NRC says it's down to how big a chunk of your take home pay is your mortgage. The bigger it is the more conservative I would be.

It your did just want to look at numbers. If you went with the 7 year fixed rate and didn't overpay, mortgage rates would have to be, on average, 2.8% over the next three years (7-10) for you to pay more interest than of you had fixed for the full 10 years.
 
A minor consideration is that you are currently at 60 to 70% LTV and in 7 years that should be under 60%, so slightly better deals may exist. But that small advantage could be easily swallowed by higher prevailing mortgage rates. And although I have no ability to predict the future. We live in a time of historically low interest rates.
 
Thank you very much everyone for all the replies and advice. I really appreciate it all. In terms of the LTV, we're only barely into the 60-70% bracket at the moment, so I don't know if we would be under the 60 in 7 years. Will sit down again this evening and go through everything and make a decision. Currently leaning towards the 10yrs, as the stability would be nice. Thanks again for the help.
 
Given our historically low rates I dont see rates going much lower and i can potentially see them go to double what they are now in a few years. Thats just guess work but thats how I feel. So therefore i would be minded to just lock in these good rates for as long as possible.
 
The problem with fixing generally is that the pricing of fixed rate products always includes a premium to cover the bank's risk in providing the product over the fixed term. You're in essence buying an insurance premium on top of the expected variable rate cost. So you might get lucky depending on the vagaries of the market but normally you'll end up paying a little extra for the peace of mind.
 
Last edited:
I wonder if that is strictly true? Or are you paying a premium over the cost of funding now? I won't pretend to understand money markets but my guess is that the cost of long-term borrowing now is mpre driven by the availability of credit rather than the long-term prediction of where interest rates are going.
 
time to plan said:
my guess is that the cost of long-term borrowing now is more driven by the availability of credit rather than the long-term prediction of where interest rates are going.
Click to expand...
That's true too but it is risker than not to guarantee a fixed rate over x years and the borrower should expect to be paying something for that guarantee.
 
T McGibney said:
That's true too but it is risker than not to guarantee a fixed rate over x years and the borrower should expect to be paying something for that guarantee.
Click to expand...
I would say that there is no risk in fixing as you have certainty. True, you may miss out on a better rate, but that to me is just not gambling.
 
time to plan said:
I would say that there is no risk in fixing as you have certainty. True, you may miss out on a better rate, but that to me is just not gambling.
Click to expand...
???? The risk is absorbed by the lender, who stands to lose on the deal if wholesale interest rates unexpectedly spike during the fixed term. Remember how they got burned with tracker mortgages. That's precisely why the borrower should expect to pay a little more for the certainty.

I never mentioned gambling. Insuring against a risk is the opposite of gambling.
 
Last edited:
Thanks again everyone for all your advice, I really appreciate it. I think I'm going to go with the 10yrs, as the security in knowing what the monthly repayment will be is big for me. Will probably use the overpayment option too when I can, so hopefully that will help also.
 
I think we're agreeing.
 
You must log in or register to reply here.
Menu
Log in
Register