Key Post I have an Ulster Bank tracker – should I consider fixing?

[Brendan Burgess]

@Astrid

Sorry, I missed your post when you first posted it.

8. Considering 5 year fixed with UB at 2.35%

1. Margin: ECB + 1.05
2. Amount outstanding: 50K
3. Remaining term: 6.5 years

With ECB rates at 2% , you will be paying 3.05%

Although no one can predict the movement of interest rates, they are probably more likely to increase than decrease in the short to medium term.

So, I think that fixing for 5 years would be the right idea.

If you do sell the house before the 5 years is up, then you may face a small early repayment penalty. But it would depend on the balance and remaining time left on your mortgage both of which should be low, so I doubt it would worry you.

Brendan

 

[Brendan Burgess]

Ulster Bank fixed 2.35/5YR

1) Existing tracker margin: ECB + 1.15

You will shortly be paying 3.15% so fixing at 2.35% seems attractive. But you will lose your tracker for the 13 years remaining after the fixed period, and a guaranteed margin of 1.15% is definitely worth something.

It really is a toss-up.

If you can handle increases in the ECB rate, I would probably stick with the tracker. If, on the other hand, these increases would put you into difficulty, then go for the security of fixing for 5 or 10 years.

 

[ulsterbank.mort]

You will shortly be paying 3.15% so fixing at 2.35% seems attractive. But you will lose your tracker for the 13 years remaining after the fixed period, and a guaranteed margin of 1.15% is definitely worth something.

It really is a toss-up.

If you can handle increases in the ECB rate, I would probably stick with the tracker. If, on the other hand, these increases would put you into difficulty, then go for the security of fixing for 5 or 10 years.

Thanks Brendan,

I've only 14.5 Years left from this month so fixing for 5Yr would only leave 9.5 years and Fixing for 10Yrs would leave 4.5 years.

Would that push you one way or the other?

I've attempted some calculations


Looking over the historical rates for the ECB it seems to have a range from 0.0 to 4.75



I've attempted some calculations with the historical range of payments of :

Max ECB rate of 4.75 would give 5.9% or €1,457 pm
Average ECB rate of 1.5 would give 2.65% or €1179 pm
Lowest ECB of 0.0 would be 1.15% or €1062 pm

Options:
Stay on tracker , now 3.15% or €1219pm
Fixing for 10 @ 2.8% or €1191pm and then just 4.5 Years at the prevailing rate.
Fixing for 5 @ 2.35% or €1154pm and then 9.5 Years at the prevailing rate.


So how likely is the standard variable rate ever to go back to the rates of the 1970s 80s or 90's ?
I presume being in the Eurozone since 2002 that is less likely/ unlikely to happen.

I may have talked myself into the ten year fixed at 2.8 by just thinking of risk rather than financial reward/saving.

Cheers,
U.m

 

[Astrid]

@Astrid

Sorry, I missed your post when you first posted it.





With ECB rates at 2% , you will be paying 3.05%

Although no one can predict the movement of interest rates, they are probably more likely to increase than decrease in the short to medium term.

So, I think that fixing for 5 years would be the right idea.

If you do sell the house before the 5 years is up, then you may face a small early repayment penalty. But it would depend on the balance and remaining time left on your mortgage both of which should be low, so I doubt it would worry you.

Brendan

That is no problem at all. Thank you so much, your advice is very much appreciated and I will follow it! Have a good weekend ...

 

[Savvy]

Thanks Brendan,

I've only 14.5 Years left from this month so fixing for 5Yr would only leave 9.5 years and Fixing for 10Yrs would leave 4.5 years.

Would that push you one way or the other?

I've attempted some calculations


Looking over the historical rates for the ECB it seems to have a range from 0.0 to 4.75


View attachment 6848
I've attempted some calculations with the historical range of payments of :

Max ECB rate of 4.75 would give 5.9% or €1,457 pm
Average ECB rate of 1.5 would give 2.65% or €1179 pm
Lowest ECB of 0.0 would be 1.15% or €1062 pm

Options:
Stay on tracker , now 3.15% or €1219pm
Fixing for 10 @ 2.8% or €1191pm and then just 4.5 Years at the prevailing rate.
Fixing for 5 @ 2.35% or €1154pm and then 9.5 Years at the prevailing rate.
View attachment 6849

So how likely is the standard variable rate ever to go back to the rates of the 1970s 80s or 90's ?
I presume being in the Eurozone since 2002 that is less likely/ unlikely to happen.

I may have talked myself into the ten year fixed at 2.8 by just thinking of risk rather than financial reward/saving.

Cheers,
U.m

U.M, I was in a similar dilemma(slightly larger but longer term mortgage)

After some advice from Brendan and lots of thinking! I took the 5 yr fixed rate and put the difference between what I thought my max repayment could be with the tracker and actual fixed amount as a monthly overpayment on the mortgage.

My thoughts were that I would rather be overpaying to reduce the capital than just paying more in interest! This actually encouraged my to revisit my mortgage length and pay additional amounts to reduce this.

You can see from amortisation calculators that the difference in interest rate after 5 years of repayments have less of an impact on your repayments as it does today so the more you can pay off it today the less impact interest rates are to you in the future.

For example if you took the 5 yr fixed and overpaid the €65 difference(€1219 - €1154). You would have an approx balance of €114.4k (vs €120.6k not overpaying).
After 5 years , you have reduced mortgage by an additional €6k and interest rates would have to be over 4.3% for you to be repaying more than you were paying during the 5 years.

 

[Brendan Burgess]

Ulster Bank fixed 2.35/5YR or 2.8/10YR

I've only 14.5 Years left from this month so fixing for 5Yr would only leave 9.5 years and Fixing for 10Yrs would leave 4.5 years.

Yes, that does change it.
I would fix for 5 years.
For the first 5 years when the mortgage balance is highest, you will be paying a lower rate. That is the most important consideration.

For the remaining 9.5 years, the balance will be lower, so even if the rate is higher than 2.8% you will be paying it on a lower balance.

The saving in mortgage interest is about €800 a year for the 5 year fixed (€171k @.45%) - so why not fix at 2.35% and pay the interest "saved" as an additional payment.

Brendan

 

[Tobyboy]

1) Existing tracker - ECB + 0.75% (Currently paying rate of 2.75%)
2) If you have an additional mortgage on the same property, what is the rate? NO
3) Amount outstanding on your mortgage - €72K
4) Remaining term - 8.4 years
5) Lender - UlsterBank
6) Value of your home - About €300K
7) Might you trade up or overpay your mortgage? Possibly overpay - If I fix I can overpay by 10%
8) 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, you are now renting out the property. RENTING
9) What rates are you considering fixing at? Fixing for 7 years at 2.8% (They have sent us the paperwork no evaluation neded by them apparently so LTV < 60%)
With the 10% overpay it would almost finish out the term of the mortgage. Are ECB rates likely to return below current 2% in the medium term?

Thanks in advance

 

[Brendan Burgess]

@Tobyboy

No one can predict mortgage rates over the next 7 years.

They could rise or fall.

2.8% does seem like good value for 7 years but is that a rate for Buy to Lets?

If you can get the 5 year home rate of 2.35% it's much better value.

After 5 years, with only 3 years left on your mortgage, your balance will be very small. And smaller again, if you overpay it.

You need to make sure that by applying for a fixed rate, they don't realise that you are renting the property. If they do, they might charge the buy to let rates which are about 2% higher.

Brendan

 

[Tobyboy]

@Tobyboy

No one can predict mortgage rates over the next 7 years.

They could rise or fall.

2.8% does seem like good value for 7 years but is that a rate for Buy to Lets?

If you can get the 5 year home rate of 2.35% it's much better value.

After 5 years, with only 3 years left on your mortgage, your balance will be very small. And smaller again, if you overpay it.

You need to make sure that by applying for a fixed rate, they don't realise that you are renting the property. If they do, they might charge the buy to let rates which are about 2% higher.

Brendan

How would this come about? It seems I only sign it and send it back. Am I missing something as to how fixing process is done? It's not a buy to let rate. From what I understand a lot like me aren't.

I didn't think about the 5 years.

 

[Brendan Burgess]

9) What rates are you considering fixing at? Fixing for 7 years at 2.8% (They have sent us the paperwork no evaluation neded by them apparently so LTV < 60%)

If it's on the paperwork and all you have to do is send it back, then you are probably be ok.

Just alerting you to the possibility.

Brendan

 

[Tobyboy]

Thanks Brendan, not sure if they are that interested in a small place in Kildare when they are about to leave the state!

 

[Tobyboy]

Would you fix allowing for the remaining term and details given, if the conditions were yours or stay on the tracker? After the fix it rolls off to variable.

 

[Brendan Burgess]

@Tobyboy

I would fix for 5 years at 2.35%.

After 5 years, your balance will have fallen to €31,000 so even if the rate is higher, it won't have that much impact.

And if you over pay in the meantime, your balance for the last 3 years will be even lower.

Brendan

 

[ulsterbank.mort]

Yes, that does change it.
I would fix for 5 years.
For the first 5 years when the mortgage balance is highest, you will be paying a lower rate. That is the most important consideration.

For the remaining 9.5 years, the balance will be lower, so even if the rate is higher than 2.8% you will be paying it on a lower balance.

The saving in mortgage interest is about €800 a year for the 5 year fixed (€171k @.45%) - so why not fix at 2.35% and pay the interest "saved" as an additional payment.

Brendan

Thanks a million Brendan,

Have asked Ulster bank for the paper work.

Regards,
U.m

 

[Tobyboy]

Any idea why the bank would want your MPRN number to fix with them? This is just for your electricity supply I thought.

 

[Paul F]

Any idea why the bank would want your MPRN number to fix with them? This is just for your electricity supply I thought.

Probably to check the BER of your property, which you can do here.

SEAI National BER Register

But that is only important if you asked for the "green" 4-year fixed rate (which requires a BER of B2 or better).

But as you are not looking for that rate, it's irrelevant. Nonetheless, it's probably better to provide it anyway.

 

[Savvy]

Any idea why the bank would want your MPRN number to fix with them? This is just for your electricity supply I thought.

On the form it states that this and the Eircode is only required for green loan.

 

[BluefishGD]

Hello Brendan, I am currently with Ulster Bank and have a Tracker Mortgage, soon to be moved to AIB and I am just not sure to stay with my tracker or fix or how best to weigh up the options. Ive been reading through previous comments and firstly thanks so much for your great advice and based on some of your previous advice to similar situation to my own I get the feeling it could be best to stick with the tracker due to the length I have left on my term but any insight or advice on my own particular situation would be greatly appreciated. Many thanks in advance.

K



1) Existing tracker margin: ECB + 1.05

2) Amount outstanding on your mortgage: €136,450

3) Remaining term: 25Yr 5 Mth

4) Lender: Ulster Bank

5) Value of your home: 218K

6) Might you trade up or overpay your mortgage? No

7) Do you face any barriers to switching? No

8) What rates are you considering fixing at? Don’t know - Just starting to look at what options are available, having spoken to Ulster bank recently they offered: Fixed 2yr - 2.95%, Fixed 4 year - 3.10%, Fixed 7yr 3.55%, all at LTV <60% but open to advice. *Just told today, Fri 25th Nov, while i was in Ulster Bank that they are putting up their Rates next week.

9) Does your house have a high BER rating which might qualify it for a lower rate? No, built 2008.

 

[Brendan Burgess]

@BluefishGD

The rates you are quoting are their new rates, so it looks as if you did not move quickly enough for their old rates.

but check if you qualify for the old rates:

Ulster Bank raises fixed mortgage rates by 0.75%

Rate hike will apply to existing customers applying for a loan to move home or top up their mortgage

www.irishtimes.com

In a statement the lender said it would “honour the original rates” offered to such customers if they have already applied, even if they have not yet received a formal loan offer.

 

[Brendan Burgess]

Assuming you don't qualify for the old rates...

With 25 years left on your mortgage, there is no point in fixing for any period shorter than 7 years. For example, if you fix for 2 years, you will lose the advantage of your tracker for the remaining 23 years.

ECB rates are currently 2% but expected to rise to 3%. So let's compare the options with 3% +1.1% or 4.1%.

You could fix for 7 years at 3.55%

This would save you 0.55% while the ECB rate is 3%.

No one knows for sure, but I don't think it's worth giving up a tracker for 7 years to save 0.55%.

If you could fix at the old rates of 2.8% for 7 years, it would probably be worth it.

Brendan