Key Post I have an AIB tracker – should I consider fixing?

@snmcc72 Your tracker margin is very good.

You could fix on AIB's 4-year fixed rate (3.2%) but it is very unlikely that you would get your tracker back after 4 years.

Your tracker rate is currently 3.25% and may go to 4.25% or slightly higher by the middle of this year (and hopefully come down a bit next year, but nobody knows for sure).

At 4.25% your mortgage payments will be about €2,175 per month. If that is going to cause you financial pressure, you should consider fixing now.

But if you can comfortably handle that kind of increase in your monthly repayment, you should probably stay on the tracker.
 
1) Existing tracker margin - ECB + 1.75% (tracker retention due to recent house move - previously ECB + 0.75%)
2) Amount outstanding on your mortgage - €320,000
3) Remaining term - 20 years
4) Lender - AIB
5) Value of your home - €700,000
6) Might you trade up or overpay your mortgage? Not in the short/medium term as house needs renovations.
7) Do you face any barriers to switching? E.g. an impaired credit record, a mortgage with a warehoused portion due to a restructuring, reduced income since you took out your mortgage. Possibly. Reduced income due to previous Covid restrictions impacting self-employment.
8) What rates are you considering fixing at? - AIB 5 year fixed <50% (currently 3.45%)
9) Does your house have a high BER rating which might qualify it for a lower rate? No


Would appreciate an objective view on whether to consider switching as I feel that I may be a bit biased towards our tracker as it has worked out so well for us previously.

My instinct is not to switch for the following reasons. (1) Never been a fan of fixed mortgages as feel that they are generally priced to work out better for the bank. (2) It looks like we’re approaching top of interest rate cycle in the next 6 months (3) Will have 15 years of no tracker after fixing.

Against all of that however, it’s unclear how long we might stay at ECB 3.00-3.5% meaning our mortgage rate could be at 4.75%-5.25% for a few years.

Am I so wedded to the historical attractiveness of previous low interest rates with an amazing tracker rate that I’ve lost sight of the bigger picture and need to move on? Or should we just take the pain for a couple of years and see where we are then?
 
@Sherwood1

A great summary of the thinking.

But the truth is that a margin of 1.75% is not worth very much. It's worth something ok, but not a lot.

Next week the ECB rate is expected to go to 3% and 3.5% a few months later, so you will be paying 5.25%.

After that it's just unknown. I suppose it could come down to 2% after a few years, but then you would be paying 3.75% anyway.

Fixing for for 5 years at 3.35%. (not 3.45%?) seems like good value.

Or you could fix for their High Value 4 year mortgage at 3.15% - You will save a further .3% for 4 years or 1.2% - seems better.

How about 10 years at 4.1%? I don't think so.

Sherwood1 said:
Will have 15 years of no tracker after fixing.
Click to expand...

Yes, but without fixing, you will have 20 years of a margin of 1.75%

If the margin were still 0.75%, it would be worth keeping. But 1.75% is not.

Brendan
 

Thanks for your thoughts Brendan.

I had the wrong LTV so you are correct that 5 year fixed <50% is 3.35%.

If I have to pay 5.25% versus 3.35%, I estimate that's a monthly difference of about €325 (€2,156 versus €1,831) which is €3,900 a year.

To pay €1,831 a month with my tracker, ECB would need to go down to 1.6%. That is probably unlikely over the next few years so I'll continue to "lose" money for quite a while by not fixing.

I'm thinking you're right and I should fix.
 
Asking for a friend, who has three AIB mortgages on PPR

(1) Tracker at 4.1% in Jan 2023, so I suspect this is ECB + 1.6%. This was carried over from previous house, I'd say that is why the margin is 1.6%.
74.5k, term until Oct-2040

(2) Variable 2.95%, 50-80% LTV, balance is 41k, term to Oct 2042

(3) Variable 2.75%, <50% LTV, balance is 47k, term to April 2043


The house is worth at least 400k. The LTV is under 50% now.

They recently improved the BER, and so now qualify for an AIB green mortgage, this is what prompted the query to me.

A fresh valuation of the house is happening last/this/next week.

They are considering the 5yr fixed green mortgage at 3.1%

After the AIB rate increases announced today 02.02.2023, their rates seem to be as follows:

Fixed Rate Mortgage Change | AIB Mortgages

aib.ie

Tracker, 74.5k up to 3% +1.6% = 4.6%

Variable, 41k, 50-80% LTV up by 0.35% to 3.30%

Variable, 47k, <50% LTV up by 0.35% to 3.10%


What should they do?

(1) Keep the 1.6% margin tracker? It will go to 5.1% next month
(2) Move the higher LTV loan to the lower LTV rate, i.e. both variable mortgages at 3.30%. (small saving)
(3) Give up the 1.6% margin tracker, and move all to 5yr fixed green mortgage at 3.65%?





AIB PDH & BTL Fixed Rates:​

PDH Fixed TermCurrent RateNew Rates
>80%50% - 80%<50%>80%50% - 80%<50%
1-2 Years4.15%4.05%3.95%4.50%4.35%4.20%
3 Years3.55%3.45%3.35%4.20%4.10%4.00%
4 Years3.85%3.75%3.65%4.25%4.15%4.05%
5 Years3.55%3.45%3.35%4.30%4.20%4.10%
7 Years4.15%4.05%3.95%4.50%4.40%4.25%
10 Years4.30%4.20%4.10%4.65%4.55%4.40%
Green Mortgage (5 Year Fixed) 3.25%3.15%3.10%3.85%3.75%3.65%
High Value (4 Year Fixed)3.30%3.20%3.15%3.95%3.85%3.75%
 
@Protocol Does your friend already have their new BER cert showing their B3 or better rating?

Whether they do or not, if they decide to re-fix with AIB they should do so tomorrow by emailing the completed mortgage amendment form back to AIB. AIB might overlook the fact that it is after the deadline (especially since the page that you linked to mentions 2nd Feb as the deadline for some borrowers and 3rd Feb as the deadline for others).
 
I get the impression they have the BER, but not the fresh valuation yet.
I will ask them tomorrow.

Are you suggesting they have a chance at the green 3.1%?
 
Protocol said:
Are you suggesting they have a chance at the green 3.1%?
Click to expand...
They don't have much to lose by trying – if they decide that fixing with AIB is their best course of action and they are prepared to accept that they might only be given the increased rate.

Protocol said:
I get the impression they have the BER, but not the fresh valuation yet.
Click to expand...
If that is the case they can apply to fix on the 5-year green rate with <80% LTV. That will be 3.15% if they are given the old rate and 3.75% if they are given the new rate.
 
Hi Brendan - I would really appreciate you take on my current scenario
Many thanks in advance!

1) Existing tracker ECB + .6%
2) Amount outstanding €305k - split into 2 mortgages - €120k fixed for 5 yrs (3.5 remaining) €185k on tracker
3) 22 years remaining
4) Lender AIB
5) House value €495k
6) Might trade up or overpay mortgage - No not in medium term
7) Face any barriers to switching - No
8) What rates are you considering switching to - AIB Green mortgage 5 years >50<80 LTV
9) Does you house have a high BER rating - Yes B3
 
Protocol said:
(3) Give up the 1.6% margin tracker, and move all to 5yr fixed green mortgage at 3.65%?
Click to expand...

This does seem like the right approach.
AIB's variable rates are not too bad. But variable rates generally could go up and AIB might have a change of policy and hike up their variable rates anyway.

As he qualifies for a green mortgage, he should go for it.

Brendan
 
@murmr74

€305/495 = 62% , so you fall into the <80% LTV band

The green rate is 3.75% fixed for 5 years.

But a .6% margin with 22 years left is very valuable.

If you don't fix, you will be paying 3.6% after yesterday's increase and probably 4.1% in a couple of months. They could go up or down after that.

I think I would keep the tracker.

Brendan
 
Asking on a relatives behalf. Assuming rates are only going one way for the foreseeable is it time for them to fix? Thanks

1) Existing tracker margin. (This is set in your mortgage contract.)
ECB 1.1%
2) If you have an additional mortgage on the same property, what is the rate?
N/A
3) Amount outstanding on your mortgage
€260,000
4) Remaining term
19 years 11 months.
5) Lender
AIB
6) Value of your home
€420k
7) Might you trade up or overpay your mortgage?
No
8) Do you face any barriers to switching?
yes . Reduced income due to illness Aug 2022. Moratorium in place until 19/7/23. MABs engaged since sept 2022.
9) What rates are you considering fixing at?
AIB green 5yr fixed 3.75 with LTV of 50-80 %
10) Does your house have a high BER rating which might qualify it for a lower rate?
Yes BER assessment due today.
11) How well could you handle a further 2% rise in the ECB rate? Likely unaffordable.
 
_ripped_off said:
1) Existing tracker margin. (This is set in your mortgage contract.)
ECB 1.1%
Click to expand...

_ripped_off said:
9) What rates are you considering fixing at?
AIB green 5yr fixed 3.75 with LTV of 50-80 %
Click to expand...

So you are currently paying 4.85% (ECB 3.75% + 1.1%)

_ripped_off said:
Assuming rates are only going one way for the foreseeable
Click to expand...

I would not assume that at all. It's very difficult to forecast ECB rates. They might go up 1/2% in the short-term, but could just as easily fall.

In any event, 5 years at 3.75% seems much better value than 4.85% and uncertainty, so you should probably fix.

A 1.1% tracker margin is ok, but not so good that you should never give it up.

AIB treats its customers fairly. If you were with BoI or ptsb, I might be reluctant to recommend giving up a tracker as you could be hit with extortionate rates when the fixed rate is up. But AIB does not discriminate between new and existing customers.

_ripped_off said:
11) How well could you handle a further 2% rise in the ECB rate? Likely unaffordable.
Click to expand...

This also strongly argues for fixing.

Brendan
 
Hi,

Would really appreciate some advice on whether to fix or stay on tracker at this point. Realise we have left it late with all the recent hikes.

1) Existing tracker margin. (This is set in your mortgage contract.)
ECB + 0.9
2) If you have an additional mortgage on the same property, what is the rate?
N/A
3) Amount outstanding on your mortgage
€227k
4) Remaining term
15 yrs
5) Lender
AIB
6) Value of your home
€450k
7) Might you trade up or overpay your mortgage?
No plan to trade up. But may overpay in future.
8) Do you face any barriers to switching?
No.
9) What rates are you considering fixing at?
3.75% for 5 yrs with AIB
10) Does your house have a high BER rating which might qualify it for a lower rate?
No.
11) How well could you handle a further 2% rise in the ECB rate?
Not affordable.

Any advice appreciated.

Thanks,
Mike
 
michaelg25 said:
9) What rates are you considering fixing at?
3.75% for 5 yrs with AIB
Click to expand...

Where are you getting this rate from?

It seems to me that the rate available for 5 years is 4.1%

After last week's increase, you will be paying 4.9% (ECB 4% + 0.9%)

Most people think that rates are near the top of the cycle and will probably come down = although interest rate forecasting is very unreliable.

I don't think I would give up a 0.9% tracker for the remaining 10 years, for a saving of 0.8% now.

Would I give it up for a saving of 1.15% ( 4.9% - 3.75%) now?

Still probably not.

Brendan
 
Hi there,

I have just had a home valuation done in order to get a better rate from AIB as an existing customer.

I have a split mortgage on my home with AIB. One "half" (mortgage) is a tracker (+1.1% margin). I owe €82,500 on the tracker "half" and about €77k on the other variable mortgage (currently 3.5% based on my original LTV above 80%).

So my outstanding mortgage is circa €159k in total which means I have now have an LTV<50% (just about!!) based on a €320k valuation. I was going to move both mortgages to their 5year fixed Green rate @3.65% as I recently got a B2 BER.


Info (most already detailed above).
1) Existing tracker margin - ECB + 1.1%
2) Amount outstanding on your mortgage - €82,500 (on the tracker "half") + circa €159k in total so I have an LTV<50% overall
3) Remaining term - 18.5 years
4) Lender - AIB
5) Value of your home - €320,000
6) Might you trade up or overpay your mortgage? Not likely in the next 4-5 years
7) Do you face any barriers to switching? No
8) What rates are you considering fixing at? - AIB Green 5 year fixed <50% (currently 3.65%)
9) Does your house have a high BER rating which might qualify it for a lower rate? Yes B2 recently acquired as detailed above


Questions
  1. My instinct is to move both mortgages to the 5year fixed Green rate @3.65% as I recently got a B2 BER and to give up my tracker. I don't see the ECB coming down to 2.5% for quite a while which is where it would need to be to bring the tracker to 3.6%. Obviously I will have 13.5 further years after fixing for 5 years.

  2. Should I actually consider going to their SVR @ 3.1% (for LTV <50%) for the current variable mortgage and keep the tracker?

  3. Or move the tracker to the Green 3.65% rate and keep the other mortgage at the SVR (and hope for a quicker drop in rates in the next couple of years)?

  4. Should I fix the (current) variable mortgage at the green rate (3.65%) and keep my tracker which will soon be at 5.1% including the margin. (not appealing right now)
Any thoughts on the above and other input appreciated!
 
@funkel

Let's take the tracker first.

You are paying 5.1% but you can fix for 5 years at 3.65%

For you to lose out in the next 5 years by doing this, the ECB rate would need to fall below 2.55%

But you have 13.5 years to go after that. You might be very sorry for giving up a tracker with a margin of 1.1%

Because of the 13.5 years left after that, it's not clear either way.

My gut feeling is that if you can handle another 1% rise in mortgage rates, stick with your tracker.

Brendan
 
For the variable rate, you have a choice of

Variable rate of 3.1%
Fix at 3.65%

The variable rate of 3.1% seems a bit of an outlier and I am not sure how long it will last.



I think I would fix this bit for 5 years at 3.65%

Brendan
 
Thanks Brendan.

Sorry, you are correct 3.75% was a green rate, which doesn't apply to us. It would indeed be 4.1% with AIB.

We are also considering a 10 year fixed option with Avant @ 3.95% with the option to pay additional 2 lump sums a year (max value of 10% of mortgage) without penalty. Our aim would be to pay off mortgage completely within this period. Also with Avant is a 5 yr option for 3.8% (same rules). What are your thoughts on these options?

Regarding tracker interest rates I have heard that there will possibly be another hike in September and possibly another early next year and that then they will level off and may remain high for quite some time.

Regards,
Mike
 
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