Fixed or variable?

A

Anon55

Registered User
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19
Hi there,

We've recently gone sale agreed on a house for €530,000 and will be borrowing €440,000. We are early 30s with no dependants and our combined salary is €112,000. We would obviously be hoping to pay off the mortgage as quickly as possible to get to a more comfortable 3.5 times our salary but we are also conscious that interest rates may rise in the next few years. We were considering a 3 year fixed at 2.55% with aib so that if we needed to break early and fix for longer we would have less of a breakage fee than a longer term fixed but we would still have the ability to overpay after 3 years if interest rates remain the same? We are first time buyers and would really appreciate any opinions or feedback on this. Thanks!
 
First of all, no one knows the answer to this.

It is expected that interest rates generally will rise.

If they do, paradoxically, there should be no break fee, because of the way break fees are calculated.

So my recommendation

1) Fix for a longer period with Avant.
2) You can overpay by 10% a year - which is €44k in the first year - without any break fee
3) Even if there is a break fee, which I don't think that there will be, it will be capped at 2% of the amount repaid.

So, how long should you fix for?

You are first time buyers. You will probably trade up in 5 to 7 years. So maybe fix for 7 years. And if you trade up earlier, you might or might not have a break fee.

Brendan
 
Brendan Burgess said:
1) Fix for a longer period with Avant.
Click to expand...
Worth checking with an Avant broker but from other threads on AAM, I understand that Avant would not consider this as it requires an LTI exemption (~3.93)

If that is the case, your options are a bit more limited but I presume you already have AIP with AIB as you've mentioned them. Are you eligible for either of their 4 year high value (2.3%) or 5 year green (2.25%)?

If you are, it would be a mistake to go with the 3 year fixed at 2.55%. The extra 0.25-0.3% will be costing you €1.1-1.3k extra per year

You don't have far to go to reach 80% LTV so both those rates drop 0.1% at <80% LTV

There is also Haven at 2.15% for 4 year green but check what else is available to you on CCPC
 
Anon55 said:
We were considering a 3 year fixed at 2.55% with aib so that if we needed to break early and fix for longer we would have less of a breakage fee than a longer term fixed but we would still have the ability to overpay after 3 years if interest rates remain the same?
Click to expand...

You don't want a longer term so you have the flexibility to break early and fix for an even longer term?

You might be overthinking this a bit:)
 
_OkGo_ said:
Worth checking with an Avant broker but from other threads on AAM, I understand that Avant would not consider this as it requires an LTI exemption (~3.93)

If that is the case, your options are a bit more limited but I presume you already have AIP with AIB as you've mentioned them. Are you eligible for either of their 4 year high value (2.3%) or 5 year green (2.25%)?

If you are, it would be a mistake to go with the 3 year fixed at 2.55%. The extra 0.25-0.3% will be costing you €1.1-1.3k extra per year

You don't have far to go to reach 80% LTV so both those rates drop 0.1% at <80% LTV

There is also Haven at 2.15% for 4 year green but check what else is available to you on CCPC
Click to expand...
Thanks so much we aren't eligible for high value or green with AIB unfortunately but we were hoping to get the house up to the green rate. Will do more research. Appreciate the detailed response. Thank you
 
I've done a bit more research and we are actually eligible for the aib 4 year fixed higher value. Thanks so much for bringing that one to our attention because its a really good rate at 2.15%! We are too high of loan to income as mentioned above for avant at the moment so we are going to go with aib for now
 
@Anon55 that's great. In your position I don't think you could do a whole lot better

And bear in mind that you should (always check first) be able to overpay without penalty due to AIB's calculation methods. This will allow you to get both your LTI and LTV down so you are in a position to switch and get the best rates in 3-4 years

Overpayment / re-fix flexibility of AIB's green 5yr fixed rate (and some other rates)

Moderator's note: Because of a quirk in how AIB calculate their break fee / early redemption charge, you can make unlimited overpayments on some of their fixed rates without penalty. Or you can break out of your existing AIB fixed rate and re-fix on a different rate, again without penalty. (You...
www.askaboutmoney.com
 
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