fixed mortgages

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suzee

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Just before Christmas I moved from a varible to 3 year fixed term mortgage at 5.I% on my bank managers advice My lender tells me it will cost me thousands to get out of it. I owe 300,000, and as interest rates are falling I want to move to a tracker mortgage.
Any advice or experience of same?
Suzee
 
suzee said:
on my bank managers advice
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You really should get independent advice on such matters in future!
My lender tells me it will cost me thousands to get out of it. I owe 300,000, and as interest rates are falling I want to move to a tracker mortgage.
Any advice or experience of same?
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Yes - breaking a fixed rate period usually involves penalties. Breaking a three year fixed rate period will probably cost a few bob alright. Your lender should be able to tell you or the terms & conditions of your loan agreement should clarify. A rough idea of the penalty might be the amount of fixed rate interest payable for the remainder of the term when you break it. You need to check this figure and then what you stand to save on a tracker rate before doing anything. It may not be worth breaking the fixed rate agreement and you may just need to sit it out.
 
on my bank managers advice
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That's poor advice. And I'm sure the bank manager would have known this at the time.
This is why it is important for people to be wary of approaching lenders directly. It's a pity, because fixed rates are being cut back now in anticipation of a reduction of the ECB rates.

The penalties may add up, but either way ask your bank they should be able to provide you with the breakage fee figures. As you still have the majority of the 3 year period to run on it, it will cost you I feel.

Out of curiosity, what reason did he give for you taking a fixed rate?


J
 
This week the mortgage advisor as my bank advised to do the same and fix. Said it would be cheaper to fix than go on tracker. When I looked into it the difference was only €2. Considering I could save alot more if the interest rates dropped I am going to risk the €24 and take a tracker.
 
suzee said:
Just before Christmas I moved from a varible to 3 year fixed term mortgage at 5.I% on my bank managers advice My lender tells me it will cost me thousands to get out of it. I owe 300,000, and as interest rates are falling I want to move to a tracker mortgage.
Any advice or experience of same?
Suzee
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ahem, they not falling - they are steady at 4%.

Opinion is divided on whether they will fall or rise in the near term, bond yields and EURIBOR futures are probably the best indicator of where the market thinks they are going. The professional mouthpieces of the Irish banks really haven't a clue as to where they are heading and have been wrong many times in the past.

Remember that Eurozone rates are set for the entire Eurozone with the primary aim of keeping inflation at or below 2% i.e. long term price stability. Eurozone inflation is currently over 3% suggesting that rates should rise in order to bring inflation back down.

They are not set to give overextended Irish borrowers a dig out so please do not base your expectations of interest rate decisions on local critieria.
 
OP neither your bank manager, nor you nor anybody else knows if interest rates will drop. If they go up which is also a possibility you might be very glad you have a fixed rate. If you're happy with the repayments, which I presume is why you changed, not just because the bank manager recommended it, then you should stay as you are.
 
Also, IF rates do come down over the current year, that will be the ECB rate. There is no guarantee that banks will pass these drops in full. This won't apply to a tracker but will to a variable rate mortgage.

The "esteemed" economists of the main banks are trotting out the line of the expected reduction in rates, but try and get them to confirm their bank will pass on any reduction in full....they won't.
 
Called up my bank on monday re remortgaging a 5 year fixed rate mortgage (now into second year). I will be doubling my mortgage. I asked what the fee was for breaking the fixed rate and they said zero. Is this because i am doubling mortgage?
 
Leafs - Banks can choose not to charge you if they so wish. They are open to negotiation on all fees. As you are doing more business with them in doubling your mortgage they have probably decided not to charge you for breaking the fixed term. Also if the new fixed rate is higher than the previous one they are actually making money on this transaction.
 
leafs said:
Called up my bank on monday re remortgaging a 5 year fixed rate mortgage (now into second year). I will be doubling my mortgage. I asked what the fee was for breaking the fixed rate and they said zero. Is this because i am doubling mortgage?
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Make sure you get this in writing from the Bank!
 
can i ask a question thats slightly related.. i have a 3 year fixed at 5.1% also.. and i have just started paying my mortage last december. how long must i wait to change? the bank tells me 18 months? true or false?? cheers....
 
If you have a three year fixed rate then presumably you must wait 3 years from the start of the fixed rate period before you can change rate/rate type without any charges/penalties? Have you read the terms & conditions of your loan agreement to see what they say about such matters?
 
In fairness to the banks in question, the financial environment was slightly different in December, so the 'advice' may not be as bad as it now appears.

Bear in mind this was before US and BOE rate cuts, and talk of a US recession, when the tracker & variable margins were being increased by many banks, indeed some probucts were being discontinued/suspended because of the credit crunch(ie).

Also at the time the ECB was threatening to increase the rate to deal with inflation - they have since softened somewhat on this, but there have been no CLEAR indications on what direction (if any) the rate will go in.

Clubman is of course correct on the independent advice - but even he would admit they are making an informed guess.
 
rmelly said:
Clubman is of course correct on the independent advice - but even he would admit they are making an informed guess.
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Informed guess is a bit of an oxymoron in my opinion. Even if they are making an informed guess there is no onus on them or guarantee that the "advice" arising will be in the best interests of the borrower. The banks and their staff must maximise returns for shareholders and not minimise costs for borrowers.
 
ClubMan said:
Informed guess is a bit of an oxymoron in my opinion. Even if they are making an informed guess there is no onus on them or guarantee that the "advice" arising will be in the best interests of the borrower. The banks and their staff must maximise returns for shareholders and not minimise costs for borrowers.
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I was referring to independent advisors.
 
In my opinion a good independent advisor will not attempt to time the market or predict future events (never mind "guess") but rather look at the individual's overall financial and personal circumstances and then look at recommending a prudent range of savings/investment/borrowing products/decisions that best suit the individual's needs.
 
suzee said:
I owe 300,000, and as interest rates are falling I want to move to a tracker mortgage. Any advice
Suzee
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Interest rates are not falling. The last time interest rates fell was June 6 2003 (five years ago). Since then, they have risen 8 times to the current level of 4% which has been in place since 13th June 2007. Over recent months banks have also been quietly increasing their interest rates on borrowings independently of the ECB, because of higher wholesale borrowing costs due to the bursting of a global (housing driven) credit bubble.

http://www.ecb.int/stats/monetary/rates/html/index.en.html

Those are the facts of the matter and they are indisputable. Now to the speculation.

The ECB's mandate in setting monetary policy is to keep inflation low (below 2%). Eurozone inflation is currently above 3% or 50% above their target level. If it were not for the global credit crunch - which has already claimed big banks & mortgage providers all over the world like Countrywide in the US, Northern Rock in the UK, RAMS Home Group in Australia - then ECB rates would be 0.5% (at least) higher than current levels. The ECB is reluctant to raise interest rates (which they would otherwise be doing to reign in inflation) because of the turmoil in the financial markets.

So, given that the ECB's job is to control inflation, that you lower inflation by raising interest rates, and that inflation is well above ECB targets - then predicting a reduction in interest rates is tenuous. Some commentators predict no change to ECB interest rates for the forseeable future.

http://www.independent.ie/business/european/markets-wrong-on-ecb-cut-says-baader-1295294.html

Out of interest, where did you get the idea from that interest rates are falling?
 
xman said:
Out of interest, where did you get the idea from that interest rates are falling?
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Probably from badly worded articles like this http://www.independent.ie/business/european/relief-as-bank-to-cut-home-loan-rate-1285014.html

In that article The Independent worded it as if rate cuts were definite! They ended the article with a 2 liner about rates actually being put up by a couple of banks. No wonder people get confused. With the Independent having so many vested interests in property websites and advertiding - they seem to like to talk up the property market whenever possible.
 
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