Higher APR but lower Interest rate on mortgage- bad idea in the long term?

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Fauve

Registered User
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Hi
A quick query if I may;
Borrow; 150000 (mortgage) at interest rate of 4.5%, APR 4.6%
Or
Borrow; 150000 (mortgage) at fixed for 3yr interest of 4.4%, APR 5.11%

Which is the better option?
The fixed for 3yrs would give lower monthly repayments (minimal) but the loan costs more?
Am I correct in thinking this?

Many thanks in advance for any assistance.
 
The APR suggests that the second option is dearer in the long term, but you can check this easily - ask the two lenders what the rate is when you come off the initial discounted or fixed rate.
 
The APR figure is calculated over the life of the loan - probably 25 years? If you took the fixed rate - after the 3 years are up you may be able to switch to another mortgage lender or a tracker with the same lender.
Over the 3 years - the fixed rate of 4.4 will obviously be slightly cheaper than the 4.5% (I assume this is a Tracker?).
Of course - this comparison is based on the assumption that ECB rates don't change over the 3 years. If rates rise - your fixed rate will be the better option but if rates fall you will not benefit from the reduction if you are on the fixed rate. You will probably have to pay a penalty to break out of a fixed rate before the end of the agreed period. The chances of ECB rates falling are probably slightly higher than them rising - so it's a gamble you have to take.
 
Hi
Many thanks for replies.
Opted for the 4.5% (Tracker) as reluctant to have anything fixed for the moment.
When I asked what the rate would be when the fixed rate ended, was advised they didn't know that at this time.
We didn't pursue it anyway, the tracker is suiting us best at the moment.
Irishlinks thanks for highlighting that minor fact of not being able to get out of a fixed rate without penalty, that had slipped my mind. (lack of sleep).
Thanks again for advice.
Fauve
 
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