Hoping to trade up in the next year, should I fix rate now??

N

Nomansland

Registered User
Messages
70
Hi,
We currently have an outstanding mortgage of 135K with BOI which is on the standard variable rate of 2.35%. With the variable (and fixed rates) going up on Friday in ordinary circumstances I would have no problem switching to a 3 or 5 year fixed rate. However our situation is complicated by the fact that we intend to move house in the next year (trade up so to speak). With this in mind I am worried that we would be subject to a penalty on clearing the existing mortgage.

My branch have verbally assurred me that I would escape this as they would allow me to transfer the existing fixed rate mortgage (if I choose it now) onto the new property and the balance could be taken up by a variable rate or a new fixed rate as would be my choice. If this was the case then I would have no hessitation in fixing right now. I have requested this in writing from the branch but they say they cannot provide a written gaurantee as I have not completed any purchase yet (this is likely to be some months away if at all).

I do however have an email from them saying that in the event of us purchasing a new home that we should be able to transfer the fixed mortgage onto the new home. This is the closest I have to a written gaurentee. It was an informal response to a query I placed with then initially.

The deadline for fixing is Friday. What do ye think I should do??

Thanks in advance.
 
The fact that they will not give you a written guarantee says it all. Also the email says you should be able - which is not a guarantee either.
I would be reluctant to fix. Why not over pay the mortgage but the difference now between the variable and fixed rate.I cannot see that the variable rate will rise above the fixed rate in a year. I know that if ECb rises though that newer fixed rates will increase.
Unless you can get it expressly in writing from the bank I would not fix.
 
In black below is the original query I sent to the bank wrt transferring a fixed mortgage onto a new residence and avoiding any penalty. In red is the reply.

Would ye place any faith in this communication. Do ye think the bank would stay true to their word??









The problem I had was that we are currently thinking of selling our house and trading up. I was worried that if we did this that we would be penalised on paying off the fixed rate. However you said that we should be able to transfer the fixed rate mortgage to the new property we would be purchasing. Is this still the case?



Yes, That is still the case where you can take an existing fixed rate on to a new mortgage for the remaining term of the fixed agreement...
 
This is a very important question and I am surprised that there is not a definitive answer. I searched online and can't find the issue discussed anywhere.

Even if Bank of Ireland says that they will do it, I think it's going to be difficult in practice. Presumably you will have to sell your current home before buying a new home. When you sell your current home, you will have to clear your mortgage. It may be some time before you buy a new home. Will they then just open up the fixed rate mortgage again?

Presumably you are trading up, so you will be probably borrowing more. The extra bit will be at the then current rate.

The information I have found online seems to suggest that you will be charged a break penalty.

http://mortgagehorizons.ie/trading-up

Plan to sell your current property: (when trading up)One thing to be mindful of is if you plan on clearing your current mortgage and are on a fixed rate there can be a Break Penalty which you will need to factor into your calculations. Your solicitor will receive a ‘redemption’ figure from the bank noting closing balance on the account on that date with interest per day noted and this will include any break penalty.
Click to expand...


[broken link removed]
One disadvantage to note with regard fixed rates is if you break out of them within the fixed rate period by selling or trading up, you will be charge a penalty fee.
Click to expand...
 
considering your possible exposure with penalty clauses etc. I would either stick with variable or fix for only one year.
 
I put this query recently to KBC Homeloans on behalf of a client. If you have a KBC Fixed Rate mortgage and trade up during the fixed rate period, you will be charged the break penalty when you redeem your mortgage. However, if you take out a new KBC mortgage immediately or shortly after for the new home, they will refund you the break penalty provided that you take the same fixed rate for the same amount for the balance of the fixed term.

As far as I know, most lenders operate similar policies.
 
Thanks Liam

That makes sense. To charge the break penalty and then refund it.

I am surprised that the banks don't publish this anywhere. The problem for the OP is that he may well pay a penalty and lose the cheap fixed rate. While he can quote the email he has received, and take it to the Ombudsman, it would be better to have clarity

Brendan
 
You must log in or register to reply here.
Back
Top