FTB - Fixed Interest for 2 yrs vs Variable

Hi there,

I know this is a personal and tough question to ask in a forum but I would like to hear people's advise on this question.

I am a FTB and I am in the process to sign up a mortgage with Bank Of Ireland. They are offering a variable interest of 4.50% or a fixed 2 years interest of 4.49%.

I know that some experts say that interests will keep raising but is it a real good deal to get a fixed interest for 2 years?

What are your thoughts on the above?

its a tough one...but usually the fixed rates are higher than the variable.Therefore my assumption is that the banks expects the variable rate to actually drop from 4.5% within the 2 years.If they expected them to rise I think you would find that the fixed rate would be much higher.Regardless of what the "experts" say that is my belief.

@Galego
Even if ECB rates fall to -1% the BoI wont be dropping the variable rate.
If you have made your decision to purchase regardless of rates then I would go with
the fixed.

Bear in mind that BoI intend raising their Net Interest Margin (NIM) and that implies that SVR will rise quite apart from what happens generally i.e. on top of any upward general rates rise.

Bank of Ireland have private American equity investors on their books and faint heart never won a lady.

WizardDr said:

@Galego
Even if ECB rates fall to -1% the BoI wont be dropping the variable rate.
If you have made your decision to purchase regardless of rates then I would go with
the fixed.

Bear in mind that BoI intend raising their Net Interest Margin (NIM) and that implies that SVR will rise quite apart from what happens generally i.e. on top of any upward general rates rise.

Bank of Ireland have private American equity investors on their books and faint heart never won a lady.

Click to expand...

Thanks.
It is odd to see a fixed rate being lower than a variable rate since banks do not like fixing rates.
Anyway, I wonder if banks will start to hike fixed rates shortly. And I do agree with you, I do not see BOI (or any other bank in Ireland) decreasing their variable rates in the next 2-3 years.

Another quick question would be:
1) 2 years fixed rate at 4.49%
or
2) 1 year fixed rate at 4.29%
????

I am tempted to go for the one year fixed rate and then see how things change in one year.

By the way, can banks change your fixed rates at any point of that fixed period?

Hi All

I am in the same position as Galego here.
However, I have been offered a mortgage with BOI at a variable rate of 4.3%

The fixed rate over 2 years is 4.49% and 3 years is 4.69%.
I am unsure if I should stick with variable or change to a fixed?

Opinions are appreciated as always..

David

I had a very bad experience with fixed rates a long number of years ago however I would lean towards taking the 3 year fixed rate option that has been offered. I do not pretend to have any great insight into how interest rates are going to pan out. I am just making a judgement call that like all the other institutions BOI have a lot of tracker mortgages which are going to be loss making for a very long time for them and SVR mortgages are where they going to try and make a profit by pushing up their margins. They have one or two big foreign shareholders who will be pushing for a return on their capital so I expect profit margins will be increased. I genuinely think that there is not much downside to taking the rates you have been quoted.

@Galego - don't be fooled because Fixed Rates are below SVR.

The lazy journalists that ply through our linen here have never looked at the cost of funds and instead are mesmerised at 'ECB' or 'Euribor' and never look at the make up of a banks funding. One line is 'free balances'. Thats the addition of all the current account balances which cost them zilch, nothing, freebie, zero, nil, fa.