FTB term & rate advice

[James5]

First time poster, long time AAM fan, particularly posts by Brendan, Sarenco, RedOnion, SeanOg & others.

Context:
FTB with a loan offer from PTSB, KBC & UB for just over 300k.
Have read the best buy thread & many others, used Karls (great) Mortgage Calculator but just need a 2nd opinion before deciding which bank/product to go for.

Debated switching between all 3 to avail of cashbacks but despite total cashback for all 3 (switch sequence: PTSB > KBC > UB) amounting to about €8k (after solicitor fees) I've decided against it. Reasons:

• Enough headaches & hurdles overcome to get this far. Don't need more.
• Tight timeframe given drawdown is likely within next 1.5 to 3 months.
• Haven't looked for a solicitor who's willing & able at a reasonable fee (mine isn't).

Pros & cons of each bank/product as I see it;

• PTSB 3yr fixed @2.7%:
  • Pros: cashback of ~6k = lowest monthly repayments over 3 years of all 3 banks/products (by about €73pm or 2.6k over 3 yrs vs UB).
  • Cons: highest interest rate, highest repayable interest (by ~4.5k vs UB), lowest/slowest principle repayment, highest balance/LTV (by ~2k vs UB) at end of 3 years. PTSB don't treat existing customers well (don't pass on new customer rates to existing customers).
• KBC 2yr fixed @2.3%:
  • Pros: Joint lowest 2yr rate.
  • Cons: can't avail of cashback (switching only).
• UB 5yr fixed at 2.2%:
  • Pros: lowest 5 yr rate. Best overpayment options. Lowest repayable interest (by ~4.5k vs PTSB). Highest/quickest principle repayment. Lowest balance/LTV (by ~2k vs PTSB) after 3yrs.
  • Cons: Competitor's interest rates may well drop within the 5 years (Given current trend & economic outlook etc.

My questions:
1. Is the following approach generally best overall?
To be focused less on the PTSB cashback carrot (& the resulting lowest monthly repayments) & instead be more focused on getting the lowest rate (& the resulting benefit of minimal interest & paying down the principle sooner)?
i.e. go for 2yr @2.3% from KBC or UB or 5yr @2.2% from UB

2. Crystal ball related question here but I'm looking for educated answers, e.g. from those here working in and/or or educated Finance.
Given the below factors or others;
- General downwards rates trend (inc UB's recent 5yr rate drop to 2.2%), global/EU economic outlook, Ireland still having one of the highest rates in the EU, pressure from Central Bank to lower rates etc
What is the likelihood that banks will lower their 2, 3 or 5yr fixed rates further within;
A. The next 1.5 to 3 months?
B. The next 5 years.

3. Would the most prudent & risk/reward balanced approach be to go for 2yr fixed at 2.3% with KBC or UB & assess the market then? Or am I best to just lock in for 5yrs 2.2% & be done with it?

 

[RedOnion]

You've done a lot of analysis!

is the likelihood that banks will lower their 2, 3 or 5yr fixed rates further within;
A. The next 1.5 to 3 months?
B. The next 5 years.

We'll do the crystal ball bit first.

I don't see rates going up anytime in the next year.
Short term, there'll be a bit of shuffling around with rates. There are already effective rates of 2.2% available with cashback factored in, and now UB have come down to 2.2%.
We'll definitely see downward movement on longer term fixed rates, rather than the short term being squeezed down below 2%. I wouldn't be surprised to see 7 year rates down at 2.5% and 10 years in the 2.8% range. All depends on how cashback plays out - we've already seen some rates launched where cashback isn't available, so lenders might be watching how that plays out.

Now, which rate?
PTSB is a good rate at 2.7%. is that a discount on their published rates?
The effective interest rate over 3 years is just under 2%.
You mentioned slower repayment - just go for a slightly shorter term. E.g. 29 years instead of 30.
Your roll of the dice is how will they treat existing customers in 3 years time?
There's a lot of factors. PTSB might be taken over within that period. They might sort out their problems, and become more competitive. But 1 thing is for certain - they will haemorrhage good business if they keep treating existing customers as they currently do. The switcher market is very active, and customers with a decent LTV that meet the current lending criteria can leave very easily.

Personally, I like the new UB rate at 2.2% over 5 years.

Do you know how to calculate an effective interest rate for each one? It might make them easier to compare.

 

[Sarenco]

Personally, I like the new UB rate at 2.2% over 5 years.

As do I - particularly with the €1,500 cashback.

 

[Boyd]

Don't forget Ulster don't give cash back, they give 1500 towards solicitor fees. Spoiler, it's the same thing Ulster bank!!

 

[James5]

You've done a lot of analysis!

Thanks but it's largely thanks to the info I've gleamed from posters such as yourself on AAM & out of necessity.

We'll do the crystal ball bit first.

We'll definitely see downward movement on longer term fixed rates, rather than the short term being squeezed down below 2%. I wouldn't be surprised to see 7 year rates down at 2.5% and 10 years in the 2.8% range. All depends on how cashback plays out - we've already seen some rates launched where cashback isn't available, so lenders might be watching how that plays out.

Thanks, I guess I don't have time to as such to wait & see if this happens. Maybe 5yrs @2.2% is a happy medium in the meantime.

Now, which rate?
PTSB is a good rate at 2.7%. is that a discount on their published rates?

2.7% is their published rate per ccpc.ie

The effective interest rate over 3 years is just under 2%.

Interesting. That's in line with what this poster was advised here; https://www.askaboutmoney.com/threads/how-much-is-ptsbs-2-or-repayments-worth.213445/#post-1618407 (notwithstanding it was based on a 2.8% rate).

You mentioned slower repayment - just go for a slightly shorter term. E.g. 29 years instead of 30.

The 'slowest/lowest principle repayment' con I mentioned for PTSB could have been phrased better. What I mean is that with a higher interest rate the principle component of the monthly repayment is lower than that of a product with a lower interest rate & therefore paying off of the mortgage balance is slower, resulting in a higher LTV comparatively at term end (which could negatively impact what rate is available to me...e.g. there can be different rates for LTVs above or below say 80, 60% or 50%).
My aim is to pay off the mortgage in as short a term as possible (to minimise total interest payable & be mortgage free). Yet I don't quite follow re the shorter term advice despite this. I think I'm missing something here. Can you elaborate?

Your roll of the dice is how will they treat existing customers in 3 years time?

Exactly, I don't want to get stuck with PTSB after the 3 year term (e.g. if PTSB won't give me their best - new customer - rate or if I can't switch to another lender if my circumstances change by then...e.g. single income etc).

Personally, I like the new UB rate at 2.2% over 5 years.

I'm tending to agree, all factors considered, still I'd like your view on question 1 (re best overall approach/logic) if you have time to ensure I'm taking the right approach.
Also, this may or may not be a good way at looking at it but when I calculate the difference in interest payable' less the 'difference in repayments (factoring in cashback towards repayments)', after 3 years UB still come out on top over PTSB.

Do you know how to calculate an effective interest rate for each one? It might make them easier to compare.

Not yet but I'm eager to learn

 

[James5]

As do I - particularly with the €1,500 cashback.

Thanks Sarenco! Yes I factored in the UB cashback into my calculations/comparisons.

 

[RedOnion]

2.7% is their published rate per ccpc.ie

Sorry, yes. I was looking only at 1 LTV band.

Apologies, the next bit is without a calculator, so hopefully my rough numbers are correct.

To work out effective interest rate, take total interest charge for the fixed period, less cash back. That's your cost for fixed period.
Total cost / balance / years will give you very close to EIR. In the PTSB example, it's just under 2% for 3 years.
UB is just under 2.2% for 5 years.

It's a clearer way to compare them I think.
You're then choosing between 2% for 3 years, or 2.2% for 5.

 

[misemoi]

Don't forget the potential overpayment facilities available on the fixed rate with UB & KBC. Useful features if you feel you pverpay.

 

[James5]

Don't forget the potential overpayment facilities available on the fixed rate with UB & KBC. Useful features if you feel you pverpay.

Yeah i factored that in too. Though the thread on the benefits of PTSB's own overpayment option was interesting (even if i didn't grasp it fully)

 

[RedOnion]

There are 2 main aspects to PTSB overpayments.

1. If you make an overpayment, it sits as a 'credit' on your account. The balance that interest is charged on is reduced, but the contractual term & repayment amount stays the same. Basically it doesn't trigger a recalculation.
In the future, if you can't pay the mortgage, they'll start using up this credit. So you could miss a fee months (depending on how much you've overpaid) without going into arrears. This feature is included on some of their documentation. I think Brendan covered it in a separate post in detail recently.

2. If you're in a fixed rate, and you make an overpayment, they don't automatically calculate a break fee. Similar to above, the interest charging balance reduced, and the overpayment sits as a credit. I understand it's more of a system limitation than something contractual or that I'd rely on.

Hopefully that's clear, but if not we can try again.

 

[James5]

Sorry, yes. I was looking only at 1 LTV band.

Apologies, the next bit is without a calculator, so hopefully my rough numbers are correct.

To work out effective interest rate, take total interest charge for the fixed period, less cash back. That's your cost for fixed period.
Total cost / balance / years will give you very close to EIR. In the PTSB example, it's just under 2% for 3 years.
UB is just under 2.2% for 5 years.

It's a clearer way to compare them I think.
You're then choosing between 2% for 3 years, or 2.2% for 5.

Thanks! That helps. While factoring in the cashback does lower the monthly repayments (if used for that purpose of course) & therefore the effective rate, it doesn't change the fact that more interest is payable over the fixed term & that less of the principal gets payed off. As such the effective rate doesn't tell the full story per se.

Anyway I seem to look at this the PTSB higher rate, even with the cashback factored in & despite the resulting lower effective rate it just doesn't seem as good 'value' all things considered as the lower UB & KBC rates. Correct me if I'm wrong. Otherwise I think i have my answer in UB.

 

[HollowKnight]

Have you used either of the banks before for current accounts / online platform? I found ptsb's online offering to be very frustrating.

 

[James5]

Have you used either of the banks before for current accounts / online platform? I found ptsb's online offering to be very frustrating.

I have & I agree to a point but it's less of a deciding factor for me.

 

[Itchy]

UB also have a 2 year 2.3% fixed. Mitigates the cons you highlighted with 5 year.

 

[James5]

Fixed-rate mortgage price war heats up

Last week, Ulster Bank introduced a five-year fixed mortgage rate of 2.2% which is the lowest fixed rate available over that time period in Ireland.

amp.irishexaminer.com

Interesting reading. Touches on a lot of what we covered in this thread.

 

[josh8267]

Until after the Election
The Government have Increased there fixed Rates on the Rebuilding Building Home Loan ,

Fixed-rate mortgage price war heats up

Last week, Ulster Bank introduced a five-year fixed mortgage rate of 2.2% which is the lowest fixed rate available over that time period in Ireland.

amp.irishexaminer.com

Interesting reading. Touches on a lot of what we covered in this thread.

Until after the election
The Government have increased the fixed Rate on the Rebuilding Ireland Home Loan,

 

[misemoi]

KBC have no online mortgage tool, but their current account & credit card ones are quite good. UB has a nice mortgage one. There's something nice about watching your balance reduce in real time! I think everyone with a mortgage should have access to a detailed mortgage calculation personal to them provided by their bank, showing their interest rate and principal separately so they can see the controllable cost of interest. It's actually quite surprising how few people understand this. Maybe I'm just a nerd but to understand how you can reduce one of your big bills is a very basic life skill!

 

[James5]

Until after the Election
The Government have Increased there fixed Rates not a peep on hear,

UB also have a 2 year 2.3% fixed. Mitigates the cons you highlighted with 5 year.

True. A little undecided between 2yrs @2.3% or 5yrs @2.2% tbh

 

[James5]

KBC have no online mortgage tool, but their current account & credit card ones are quite good. UB has a nice mortgage one. There's something nice about watching your balance reduce in real time! I think everyone with a mortgage should have access to a detailed mortgage calculation personal to them provided by their bank, showing their interest rate and principal separately so they can see the controllable cost of interest. It's actually quite surprising how few people understand this. Maybe I'm just a nerd but to understand how you can reduce one of your big bills is a very basic life skill!

Absolutely agree. Not even brokers do this for clients it seems.