is 5% mortgage interest rate FIXED for next 2yrs good?

L

lala1

Guest
Hi All,
Our interest rate is being put up this month to 5%(we're on tracker rate with IIB), they've given us an option of a fixed rate of 5% for next two years...which sounds very attractive as it's about to go to that rate anyway..but we're kinda wonderin whats the catch??...Do they think interest rates will be going down over next while?..We're not sure what the outlook is on interest rates for the next couple of years and are unsure what to do, dont want to loose out on this option either if it is good? any advise apreciated.
 
Hi lala1, no one really knows which way the rates are going to go,if you are lookign to budget for a definite amount coming out every month for 2 years then fixed is the way to go,that rate of 5% fixed is very good.
 
but to be fair ECB rates are "expected" to fall next year so your tracker mortatage would aswell then..but its guesswork and 5% is a good rate for next 2 years
My advice would be to stay with your tracker
 
Only fix if you really need to - e.g. for cashflow reasons - and not in an attempt to time the market and save money compared to a competitive tracker rate.
 
5% is a good deal given the current situation.
Fixed rates are much better for a PPR - stability is key for PPR.

Gambling on trackers and variables on a PPR is a silly move IMHO.
For the sake of marginal rate differences, the risk is not worth it.

Attempts to time markets are a risk that shouldn't enter into the roof over a families head.
Minimise risk, and go fixed, esp at that rate.
 

If you are on a tracker and your rate is going up to 5%, I assume you are on traker rate of ECB +75bps. This is very competitive and it is not something that should be given up lightly. As Clubman said, only fix for cashflow reasons. If you fix now, it is highly unlikely you will be offered a comparable tracker in two years time and you have no idea what rates will be when your it is time to reset your new rate.
 

If the original poster can comfortably afford their mortgage repayments even if rates were to increase by a few percent then they should almost certainly stick with a competitive tracker. Fixed rates will usually work out more expensive on average and they are much more inflexible (e.g. penalties if you want to redeem/reduce the capital balance early or move house etc.). If the original poster is hard pushed to meet the repayments or might be if rates increased by a few percent then they should probably consider fixing but for as short a period as possible.
 
That sounds exactly the arguement the bank pulled on me three years ago.
I went fixed anyway, despite them telling me I was "mad". Also, if the rates go up, there is no penalty in overpaying, as you are saving the bank money. If they go down, 2 years is not going to kill anyone...

The luxury of not coughing up the dinner everytime the ECB does something, and the hassle of adjusting payments is worth the potential downside.

Given that the ECB seem to be more worried about inflation than the irish property market, counting on them to do anything is a stretch.

If the OP has the extra money, they have the option of both routes.

If it's a case that little Johnny is not getting new shoes to go to school, cos the ECB increased rates, I'd gravitate towards the less risky option.

On an investment prooperty, go mad if you like
 

+1. The idea could be to tempt you off that rate, but you suffer in the future. I'd stay on the tracker.
 
IIB no longer offe ecb trackers to new customers and none of their fixed rates or variable rates ar close to 5%.
What is your tracker rate going up from? what is the agreed margin on the tracker?
Moving to a fixed rate with IIB will probably mean that you will not be able to go back on that tracker rate - because they no longer do tracker mortgages.
Personally I would stay with the tracker (if it is ecb plus 0.75%)
 
cancan said:
That sounds exactly the arguement the bank pulled on me three years ago.
I went fixed anyway, despite them telling me I was "mad".
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I'm not "pulling" any argument and never accused anybody of being "mad" for choosing either option!
Also, if the rates go up, there is no penalty in overpaying, as you are saving the bank money.
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Depends on the T&Cs of the specific loan agreement surely?
The luxury of not coughing up the dinner everytime the ECB does something
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Something that should not affect somebody who can comfortably afford the repayments now and should rates increase by a few percent as I have already said several times.
If it's a case that little Johnny is not getting new shoes to go to school, cos the ECB increased rates, I'd gravitate towards the less risky option.
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Yes - exactly what I have been saying.
 
ClubMan said:
Depends on the T&Cs of the specific loan agreement surely?
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If i borrow at 4% fixed and rates go to 5%, if I repay early, the bank can lend that same money at the higher rate. It would be a strange bank that would turn down more money, but we have some strange banks at times.
 
It would not be strange for a bank to charge a penalty and lend the money out at the higher rate thereby maximising revenues/profits.
 
I'd agree with cancan if the fixed period was 10 years maybe but the benefits of fixing for two years are very limited.
ECB +0.75% is a rate that banks can't even borrow at these days. You would be mad to give up this for a fixed rate over a limited period
 
You'd be nuts to go off that tracker.
They're making you the offer to get you off the tracker because the tracker you have at the moment is too good.
Stay on the tracker.
 
ClubMan said:
It would not be strange for a bank to charge a penalty and lend the money out at the higher rate thereby maximising revenues/profits.
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On AAM recently we've had a few posters whom the banks have waived the penalty for because rates have gone up. I too prefer fixed rates, the stability outweights the risks but OP you have to make that call. I stupidly have a fear of rates going to nearly 20% no matter how many people tell me it can't happen with the ECB.
 
I would stick with the Tracker. You may never get that rate again as IIB have stopped trackers. You could be looking at 1.75% above ECB in 2 years time
 
Bronte said:
On AAM recently we've had a few posters whom the banks have waived the penalty for because rates have gone up.
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Did they do this unilaterally or was it part of the loan agreement terms & conditions? I would not necessarily bank on all lenders necessarily doing this and I would imagine that at least some fixed rate loan agreements would allow the lender to charge the penalty even if they would not otherwise be out of pocket.
 
Hi everyone,
Meant to get back earlier, just wanted to say thanks for all the advice,we decided to stick with our tracker.Thanks again.
 
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