Fixed or Variable?

[CMG]

Hi
we are a married couple currently applying for a morgage but we have some difficulties making up our minds on which morgage would be 'in our best interest' in the current climate and with the view on the next years.
We are considering taking out a 5 years fixed rate morgage but then of course there is the chance that next year or the year after the rates are better and then we're stuck in this fixed rate.
If we choose for 1 year fixed rate we might end up with a less favourable rate next year. And then there is always the option of the variable rate.
Could anyone provide us with some tips or advice? Would be much appreciated.

Thanks,

CMG

 

[dishwasher]

fundamentally it comes down to whether you can still afford to meet variable rate repayments if rates rise. Variable rates are at a historic low (ECB 1%) - go to some online calcualators and work out what the repayments would be if ECB went up. Commentators are taking about ECB rate rises in 2010 though when and how much is anyones guess. It isn't generally advisable to try to time the market as the banks supposedly have priced in the expected view of rates over the period in question - so the decision should be fundamentally about your own affordability.

Having said all that we just fixed for 5 years with AIB because we can't get a tracker anymore so would be exposed to both future ECB rises and future rises in interest rates that the bank might impose to boost its profitabilty. PTSB (who aren't being bailed out by NAMA) have already increased the standard variable to improve their own profitabilty. The banks that are competitive are BOI/AIB/EBS and it has been flagged in the press that they are likely to increase their svrs once NAMA goes through. BUT WHO KNOWS??

I don't want to take chances on paying 4%+ over the next 5 years as we will still be knee deep in childcare costs for this period so we fixed at 3.86%.

HTH

 

[Kluivert]

I would find the best fixed rate and go with that.

The ECB will not lower rates any further in order to curtail inflation in France and Germany.

In my opinion if anything they will start to increase rates.

If you are staying put in your home I would recommend fixed rate of 3 - 5 years.

If you think your going to move home in the near future I would recommend a short fixed term.

In addition, if during your fixed term you release that you can afford to pay extra and want to put it against the principal then you can. You can pay in extra in the mortgage but the extra repayment will come off the prinicpal amount when the fixed term is up. (PTSB: this is what they explained to me, I hope thats correct).