Fixed on 5.4%,can i change rate?

[sheepie]

Hi all,

Please can anyone advise me on what to do?!
I have a circa 290,000 euro mortgage on 5.4.% with B.O.I.
The 5.4% is a 3 year fixed rate that has 2.5 years left.
I have approx 32 years left on my mortgage.I pay it fortnightly and my payments are 798 euro (after trs)

What i was wondering was...
Can i change to a lower variable rate or am i 'locked in' to the fixed rate for the remaining 2.5 years?
Would it be worth my while changing mortgage providers?

Any advice would be greatly appreciated.
Thanking you in advance.

 

[Senna]

You can change from a fixed rate, but it will cost you. I was told that the penatly for doing this works out the same amount as 6 times your monthy payments or about €9.5K in your case.
It probably wont be worth it, but you can ask your bank for the exact cost and work out what it would save/cost you.

Also, although the ecb rate has fallen and there is talk of another rate cut, this does not mean it will last long, as soon as the ECB sees banks stabilising and the recession in bigger eu countries ending they will put the rate straight back up. So over the remaining 2.5 years the fixed may save you more. I believe the ecb need the rate about 4.5-5 to control inflation (maybe not in the current economy) but these rates will be the norm soon.

 

[sheepie]

Thanks for the helpful info senna
Does anyone think that i should just concentrate on paying an extra 100-200 euro per month off my
mortgage?... as id be in a comfortable position to do so.
I've read many other posts about this subject but im still a little in the dark!

 

[NorfBank]

I was told that the penatly for doing this works out the same amount as 6 times your monthy payments

This is a rule of thumb that is used by brokers, I actually don't know where it came from but I was taught it too back in the day. I think it's just used to illustrate to the client that it can be expensive to come off a fixed rate.

The actual factors involved in the bank calculating whether there will be a penalty or not are

a) the interest rate at which the bank borrowed the money from the interbank market at the start of the fixed rate period. Say 5.4% in this case for arguments sake.
b) the interest rate it will now have to borrow at in order to pay back the c€290k to its lender i.e the current price of 2.5 year money.

If b is less than a then there is a penalty, if b is greater than a then no penalty.

Sheepie, I would call your bank to see of there is a penalty to be paid as with the price of money increasing since you took your mortgage out you may not have to pay a penalty to switch to a variable rate.

As regards paying extra a month, as you on a fixed rate you may not be able to make extra payments, again a call to the bank is necessary.

 

[sheepie]

Thank you norfbank for your helpful input.
Im going to give the bank a ring sometime during the next week for some answers!