Key Post Should borrowers with trackers consider fixing? (General guidelines)

It seems increasingly likely that we are going to see a series of rate hikes by the ECB in the near future.

According to Philip Lane, ECB chief economist - "I think it’s clear that at some point we’re going to be moving rates, not just once, but over time, in a sequence."

If the ECB raise the main refi rate by a cumulative 2 percentage points over the next couple of years, that would triple the rate being paid on the average tracker mortgage to 3.00%.

Today's fixed rates of 1.90%, where available, would look very attractive in that scenario.


Moderator's note: if you have a tracker with one of the below lenders, read the information in the first few posts of the current thread but please post any questions in the appropriate thread:

If you have a tracker from a lender other than the ones above, e.g., Haven, start a new thread with the name of the lender in the title.

Money markets are now pricing in roughly 105bps worth of ECB rate hikes by year-end.

So, if the money markets are right, the rate on an average tracker would jump from 1.00% to 2.05% by year-end.

I think if I had a tracker with a margin in excess of 1%, I would be seriously considering fixing at 2% or lower at this stage.

One thing anyone with a tracker should make sure of -

If you are fixing, make sure that it's a long enough period that it either finishes out your mortgage, or that only a couple of years are left.

Do not put yourself at the mercy of a bank's standard variable rate at the end of a fixed period.

So if 10 years left, look only at 7 & 10 year fixed. 15 years left, primarily look at 15 year fixed, but consider 10 years.

In reality you need a balance of 200k and 10 years+ term left combined with a tracker of 1.5% or higher for it to be a very worthwhile option.

Here is my summary of the factors to consider whether you should fix a tracker rate or not.

What is the margin on your tracker?
If you have a tracker rate of ECB + 1.75% (or higher), it's of little value and you should almost definitely fix.
If you have a tracker rate of ECB + 0.5%, then you should probably not fix.

Note: "ECB + 1.75%" means that your tracker margin above the European Central Bank base rate is 1.75%. This is set in your mortgage contract.

And because the ECB base rate is 1.25% (as of September 2022), a person with an "ECB + 1.75%" tracker actually has an interest rate of 3%.

What rate can you fix at and how long can you fix for?
If you are a customer of permanent tsb the maximum term you can fix for is 7 years and the lowest rate is 3% (or 2.8% for their 5-year fixed green rate).
It may be worth giving up a tracker of ECB + 1.75%, but it's not worth giving up ECB + 0.5%

On the other hand, if you can switch to a 10-year fixed rate at about 2.9%, it may be worth doing.

If you are going to give up a cheap tracker, you should be fixing at a low rate for a long period.
There is no point in giving up a cheap tracker to fix for two years, as you would then be faced with the higher rates prevailing at the end of the two years.

How long is left on your mortgage?
If you have 20 years left on your mortgage, don't give up a cheap tracker to fix for 5 years.

On the other hand, if you have 10 years left on your mortgage, fixing for 5 years is probably OK. After 5 years, you will have paid off 50% of your capital, so the rate will be less important at that stage.

If you intend clearing your mortgage early, this would suggest you should not fix
For example, it may not be a good idea to fix if:

• You intend to trade up
• You intend to pay a significant lump sum off your mortgage
• You intend to significantly overpay your mortgage

You can overpay a tracker at any time without penalty, but you may face an early repayment penalty if you pay a lump sum off a fixed-rate mortgage. However, some lenders, including Avant and Finance Ireland, allow you to make large overpayments without penalty – and they will waive any break fee if you trade up and take out a new mortgage with them (subject to certain conditions; see this post).

Some AIB mortgage contracts, and maybe some others, allow you to return to your tracker after fixing
In most cases, when you fix, you lose your right to your tracker. But if your mortgage contract is crystal clear, then you could consider fixing. But it must be crystal clear and the margin must be specified, e.g., "At the end of any fixed rate period, you will have the option of returning to the tracker rate specified in Condition..." Get it in writing from your lender that you can return to this actual rate.

Some contracts say "You will be offered a tracker at the then prevailing rate". That is no good to you, as the prevailing margin at that time may well be 3.5%.

Be careful not to spend so much time arguing this with AIB that fixed rates have risen in the meantime.

An added complication

If you look at your figures today, you may decide that it's worth giving up your tracker and switching to Avant.

But it could take 4 months to switch to Avant by which time the rates may well be very different.

So should you fix with your current lender instead before they put up the rates?

Folks

To make it easier for people facing this decision, I have summarised the issues in one or two posts.

I have tidied up the thread by deleting most of the other posts, which are included in the summary.

Are there other factors to be considered?

Moderator's note: the current thread is now closed. If you want to ask whether you should fix or not, please post your mortgage information in the appropriate thread:

If you have a tracker from a lender other than the ones above, e.g., Haven, start a new thread with the name of the lender in the title.

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If you want to ask whether you should fix or not, please provide the following information:

1) Existing tracker margin (often referred to here as "ECB + X%")
2) Amount outstanding on your mortgage
3) Remaining term
4) Lender
5) Value of your home
6) Might you trade up or overpay your mortgage?
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.
8) What rates are you considering fixing at?
9) Does your house have a high BER rating which might qualify it for a lower rate? Check it here or estimate it if necessary.

N.B. For point number 1 above, don't simply say, e.g., "Existing tracker margin: 3%".

Instead, say something like "Existing tracker margin: mortgage is now 3% after the July rate increase"

or "Existing tracker margin: ECB + 2.5% (mortgage is now 3.75% after the September rate increase)".

This is to remove any doubt about what tracker margin (above the ECB base rate) you got when you took out your tracker mortgage.

Brendan Burgess said:

If you want to ask whether you should fix or not, please provide the following information:

1) Existing tracker margin
2) Amount outstanding on your mortgage
3) Remaining term
4) Lender
5) Value of your home
6) Might you trade up or overpay your mortgage?
7) Do you face any barriers to switching - e.g. an impaired credit record, a split mortgage, reduced income since you took out your mortgage.
8) What rates are you considering fixing at?

Click to expand...

Hi,
Should I fix or not?

1) Existing tracker margin - tracker 2.25%
2) Amount outstanding on your mortgage - 233k
3) Remaining term - 20 years
4) Lender - BOI
5) Value of your home - 435k
6) Might you trade up or overpay your mortgage? - we might overpay in the future
7) Do you face any barriers to switching - e.g. an impaired credit record, a split mortgage, reduced income since you took out your mortgage. - split mortgage, i have tracker for mover @ 2.25% 233k for 20years and fixed at 2.7% 96k for 5 years total loan 330k for 20 years
8) What rates are you considering fixing at? - I don't know? I'm looking for a better value.

Am I getting a good deal here? or get a fixed mortgage for the 330k for 20 years from other bank e.g. AVANT?

Any input will be highly appreciated.

Your mortgage is €330k/€435k or 76% Loan to Value

You could fix with Avant for 10 years at 2.6%

That seems better value than you are on at the moment.

2.25% 233k for 20years and fixed at 2.7% 96k

The ECB rate has to rise by only .35% for you to be better off with Avant.

You need to check what the break fee will be on the fixed element, but I think it should be quite low.

The Bank of Ireland fixed rate is 3.3% for ten years! So Avant is much better value.

The problem is that by the time you actually move, the Avant rates may well have risen.

I would suggest you apply to both Avant and Finance Ireland.

And when you are ready to move decide which rate is the best.

Brendan

1) Existing tracker margin 1.35%
2) Amount outstanding on your mortgage €170k
3) Remaining term 20 years
4) Lender BOI
5) Value of your home €240k
6) Might you trade up or overpay your mortgage? Overpay
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. No
8) What rates are you considering fixing at?
Boi only offering 3% fixed 5 years

What’s are my options? I’m thinking sit tight.
It’s rented out also €1250 per month

1) Existing tracker margin ECBR+1.05%
2) Amount outstanding on your mortgage €127k
3) Remaining term 14 years
4) Lender Ulster Bank
5) Value of your home €300k
6) Might you trade up or overpay your mortgage? Might overpay in the future
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. No
8) What rates are you considering fixing at? Not sure if I should?

Buddy1977 said:

1) Existing tracker margin 1.35%

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Buddy1977 said:

Boi only offering 3% fixed 5 years

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Hi Buddy

Sorry, I missed your original post.

I don't think it's worth fixing for just 5 years. After that you will be subject to BoI's rates.

You can't switch to a cheaper lender as it's a buy to let.

So agree with you to sit tight.

Brendan

markgr5609 said:

1) Existing tracker margin ECBR+1.05%
2) Amount outstanding on your mortgage €127k

Click to expand...

So, say you fixed with Avant for 7 years at 2.25%

You will pay more interest while the ECB rate is below 1.2%
But after that you would be paying less by fixing.

And you would face the upfront cost of €1,500 to switch - that represents about 1% of your mortgage value.

It really is a toss up.

On balance, I would probably stick with the tracker and overpay it if funds allow.

Brendan

Good morning Brendan,
Looking for your advised.
My mortgage was with Tanager and sold to Pepper, with arrears now of €4,000 (will be finished this September) capital remaining once arrears is paid will be €354,000 with 16 years remaining. the mortgage is a tracker +.085% and the property is value around €520,000.
We are currently paying Pepper (capital and arrears €2,550 each month).
With interest rates expected to increase should we start to consider dumping the tracker and try to get a fix rate for 5/10 years ?
I know banks will not consider me at present but when the arrears are gone we should be in a better position to talk to other banks or/even discuss with Pepper if they entertain this.
I would consider all options to ensure we do not experience what we have gone through over the last 8 years.

Thank you.

Hi Browner

1) You will not be able to do anything at all until September. No lender will consider you while you are in arrears. The situation in September may be very different from now. Fixed rates may be higher by then, and your tracker will look very attractive.

2) Even in September, I doubt that you will be able to switch. The only lender who might consider talking to you is Bank of Ireland and their fixed rates are very high.

3) In any event, a tracker margin of 0.85% is very valuable. So even if you could switch to the cheapest lender, Avant, I don't think you should.

4) Does Pepper quote fixed rates? It could be worth asking them for a fixed rate. I doubt that they would be attractive, but they might do a deal to get you off the tracker. There is no harm in asking them. And if they do quote you a rate, come back and ask again. But you should not fix for any period less than 10 years, unless they guarantee you that you return to your tracker at the end of the fixed term, which is unlikely.

5) If you are in arrears, you are still subject to the MARP. Therefore you could ask for a low fixed rate as part of that. Maybe say that you are concerned about the future and would like to fix.
1) What fixed rates do you offer?
2) If I fix, do I return to my Tracker rate of ECB +0.85% at the end of the fixed term.

If they reply that you will be offered a tracker rate at the then prevailing tracker rates at the end of the fixed term, then you should decline.

Brendan

Hi Brendan,

Thank you for all your information.

Should I consider fixing?

1. Rate : 1.68%+ECB
2. Balance: €121,800
3. Term 14yrs
4. PTSB
5. Value €390,000
6. Trading up / selling - not looking likely
7. No
8. Open to your suggestions.

Thank you!

Hi Brendan,

I hope you are keeping well. Like others on the forum I suppose I'm looking for some general guidance really.

1) Existing tracker margin - ECB+ 0.85%
2) Amount outstanding on your mortgage - circa 151k
3) Remaining term- 15 years
4) Lender - AIB
5) Value of your home - Around 380k
6) Might you trade up or overpay your mortgage? - overpay
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. - No
8) What rates are you considering fixing at? - nothing at the moment - I think I'm on a good tracker but I suppose I just want to get an impartial opinion.

Thanks for your time Brendan.

Irish22 said:

1. Rate : 1.68%+ECB

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Irish22 said:

4. PTSB

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I think that you should either stay on the tracker or switch to a different lender and fix. But you should not fix with permanent tsb.

PTSB has special deals for new customers but keeps its existing customers on very high rates because they know that most of them won't go to the trouble of fixing.

The longest you can fix for with ptsb is 7 years at 3% and after that you will have lost your tracker for the remaining term of the mortgage.

In contrast, you could switch to Avant and fix for
7 years@ 2.25%
10 years @ 2.4%
or 14 years @ 2.4%

Brendan

.

dunkellin said:

1) Existing tracker margin - ECB+ 0.85%

Click to expand...

dunkellin said:

4) Lender - AIB

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dunkellin said:

6) Might you trade up or overpay your mortgage? - overpay

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The longest you can fix with AIB is 10 years at 3.1%.

It's a close call between this and keeping a tracker at 0.85%.

But given that you are considering overpaying, I would stick with the tracker.

Brendan