renegotiating mortgage interest

A friend of mine is building a house

he is getting a mortgage from Bank of Ireland, the amount is close to 300k

he has already drawn down 100k of the money to pay the builder

he will start repaying the mortgage from next June when the house is completed.

He's locked in at a fixed rate a little less than 5% with Bank of Ireland for the first 2 years until June 2011.
The agreement was signed in the first half of 2008.

He's a little disappointed that his interest will be so high and not benefiting from the recent ECB bank cuts .

Would he be wasting his time going to BOI asking them to tear up the original contract and putting him on a ECB tracker or other product ?

Would he be wasting his time going to another bank ?
One point is that with the tightening credit criteria for mortgages, another bank possibly wouldnt want to take him on, as he will be completely stretched on his current deal i.e. over half of his net pay will go on mortgage repayments.

No harm in asking .... I've always found BOI very reasonable in my dealings with them.

Failing that a couple of phone calls to other lenders might well be worth doing.

LouisCribben said:

He's a little disappointed that his interest will be so high and not benefiting from the recent ECB bank cuts.

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Did / does he not understand the concept of a fixed interest rate?

rmelly said:

Did / does he not understand the concept of a fixed interest rate?

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Thanks for your comment.
Yes he understands the meaning of a fixed interest.

He also understands the meaning of a contract.

He'll have a word with the bank on Monday to ask them about tearing up the existing contract, going on a variable or tracker.
Failing that he may try other lending institutions.

LouisCribben said:

Thanks for your comment.
Yes he understands the meaning of a fixed interest.

He also understands the meaning of a contract.

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Are you sure? The way you worded your post suggests he doesn't.

I'd be disappointed in the same circumstances - disappointed in myself.

rmelly said:

Are you sure? The way you worded your post suggests he doesn't.

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He was just hoping that out of goodness a bank may be happy to tear up a fixed interest rate contract and replace it with a variable or tracker. He knew it was unlikely, but asked me to ask on AAM as he doesnt have a computer !

rmelly said:

I'd be disappointed in the same circumstances - disappointed in myself.

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I can understand you'd be disappointed, by why disappointed in yourself ?
The deal my friend got was an OK deal at the time.
Disappointed in yourself implies a bad decision was made based on the macroeconomic situation and ECB rate at the time. This is not necessarily the case. Neither my friend (nor anybody else) knew that the ECB rate would fall.

I can understand you'd be disappointed, by why disappointed in yourself ?

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Nothing to do with the macroeconomic situation...If I read your initial post correctly, with the fixed rate he will be paying more than half of net pay to service the mortgage. Has his net salary fallen since signing? Basically this was never going to end well.

LouisCribben said:

He'll have a word with the bank on Monday to ask them about tearing up the existing contract, going on a variable or tracker.
Failing that he may try other lending institutions.

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He might have to pay a penalty clause to break out of the fixed rate. This would also apply to if he decided to switch to another institution.

I did not think that the lending institutions were giving out Tracker Mortgages anymore, or at least if they were, that they were quite hight rates