Fix the Morgage... or stay Variable

I took out a variable morgage in 2006 of €295k for 34 years with Irish Nationwide. I am currently paying:
2.74% nominal rate (2.77%APR). €1,287.36/month

As I am currently in negative equity I am stuck with this lender. Recently they have offered what look like good....fixed rates as follows:

Fixed Nominal Rate APR Monthly Repayment
2years (no penalities) 3.24% 2.88% €1,365.13
3years (penalities) 3.99% €1,485
5years (penalities) 4.99% €1655

I know you need to be Mystic Meg to tell the future.... But I would be interested to know your opinions on the following as I am not very good on these things:

1. Are the above fixed rates good? considering I cannot move

2. What is the believe of future interest rates over the 2,3,5 years? would I potentially save money by fixing now or stay variable?

3. If fixing, is it better to fix 5 years or less? based on potential ECB and bank rate rises


Thanks

hi den considering you cant switch out of irish nationwide they are good .
what do you mean 2 yr fixed with no penalties ? is this if you want to break out of it ? if so make sure u get that in writing .
rates will go up . the question is when . the ecb president said there wont be an upward review until the end of this yr at the earliest . but with the bigger eu countrys moving out of recession they will be under pressure to increase rates. and how quickly they increase them is anyones guess.
how is ur job . is it secure . have u taken any pay cuts or are they on the cards. knowing that u are going to pay x amount and not having to worry about rates mite be a comfort . its up to you initially . some lenders offer a split mortgage so u can fix half and put half on var rate or longer fixed option

hi househunter, appreciate reply...

2yr fixed with no penalities ?
Basically Irish Nationwide has sent out a letter offering customers...... "This competitive, innovative product has a rate, which is fixed at 3.24%p.a. over the next two year period, but with the added unique option that you may, without penality, at any time opt out of this product and revert to the current standard variable interest rate at that time. You may also partially or fully repay your morgage at any time during this period without penalty......"

Their rates have come down (which seem strange..for banks) as in 2009 a 2yr fixed was 5.35%. So I am suspicious:
1. Is the bank concerned about its customers? or is it Government pressure because of bailout?
2. Do they think the increase of ECB will be later as a result of the problems with the Euro (€) and Greece.

Thanks

it sounds good . i havent heard of it before . u seem to be scripting it from some where so i take it u have it in writing.
it depends when in 2009 they were offering 5.35%
early 2009 rates would still have been high as there were still more ecb cuts . but even still that would seem high to me.
it would be who ever irish nationwide are getting there funds from who is offering this . maybe they thing that rates will stay lower for longer . its hard to know . but it sounds like u have the best of both worlds . fixed rate with an option to get out of it if you want to .

If they say you can break out of this 2 year fixed rate with no penalties at any time.. does that mean ...Thay can break you out at anytime too and revert you back to the standard variable at that time ?

Please check all the small print.

The 2 year looks good. No one knows where rates will go, it was forcast to go up this year but this is looking less and less likely. Even if it doesn't happen banks are starting to increase their margins so who knows which bank will be next to increase it's rates

Can you afford for rates to go up? By how much before you would be hurting. Do you want the comfort of a fixed rate?

It might be worth seeing if you can fix part of your principal, eg. 50%, - thereby reducing your exposure to rising rates, - but also retaining some flexibility, - ie. the ability to pay off a lump sum and reduce the term.

if you can afford the swings, variable will mostly be cheaper in the long term.

thoae rates dont look very attractive to me.