Getting out of fixed mortgage

J

jannak

Guest
Please could some someone give me advice on the following.

I recently bought a house, Aug 2011. I went for a fixed 5 yr interest rate with AIB at 5.35percent on a loan of 194k. The purchase price was 260k (for a 3 bed semi-d in D16). (term of 29yrs). Not having a clue myself I followed the advice of my financial advisor at the time.

Now, the repayments are 1100e per month. This is fairly manageable for me as my job is secure. However, now I wish I had gone for the variable rate, because obviously I would be paying less and I hear there might be interest cuts coming down the line. Also, becuase if I could go variable, I would be in a position to overpay and then this would reduce my principal (am I right in thinking this?).

What kind of penalty will I be asked to pay if I try to go on a variable rate and would this be a prudent move to make?
Is it a case of making a good pitch to your bank as I gather it is something they would be loathe to do.
 
Well a couple of months ago interest rates were set to go up which is presumably why you took the fixed rate interest in the first place? To have the security of knowing the repayments. Don't see how your financial advisor was at fault?

Yes you can break the fixed term, ring your bank and ask them how much, I think it's 6 months interest, so it will be a hefty cost. But bear in mind that even though interest rates are set to go down, it doesn't mean they won't and nobody but nobody knows what way they will go.

Also don't forget that banks can themselves increase the rates without the ECB, look at the Permanent's variable rate which is 6% or thereabouts. At some stage banks are going to want to make more profits and when they think they can they will increase interest rates.

If you want to overpay, pay into a high interest bearing account now and when the 5 years are up, lob the savings into the mortgage.
 
Don't be afraid to negotiate/haggle with the lender to see if you can reduce any fixed rate breakage penalty fee even if I suspect that this is a lost cause. Did you "financial advisor" explain the pros and cons of fixed versus variable rates to you?
 
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