Key Post Should I fix my rate to escape the very high variable rates?

Interesting to review this two years after the initial post:

Should I fix my rate to escape the very high variable rates?

The Fair Mortgage Rates Campaign has not succeeded yet.

I do expect that variable mortgage rates in Ireland will come down towards the eurozone levels. This will happen if Michael McGrath's bill forces them down or if the banks bring them down to order to discourage the bill being brought into force.

So my advice is still - Irish variable and fixed mortgage rates are still 1.5% higher than they should be.
I expect them to come down, especially for <80% LTV mortgages.
If you fix now, you will not benefit from the reductions until the fixed period is up.




If you are with AIB or EBS, it seems clear that you should not fix.



If you are paying a high SVR to Bank of Ireland
First, you should try to switch to another lender
If you can't switch, you should ask them to reduce the variable mortgage rate
If they don't, then you should fix for one year.

If you are with KBC, I don't think it's worth fixing for one year to save 0.2%.
Don't forget, if you are an existing customer of KBC, you are probably paying a far higher rate than 3.1%,but you can apply to have the rate reduced to the same rate on offer to new customers with the same LTV.

If you are an existing customer of ptsb, you should not fix for two years at such high rates.
Don't forget that if you are paying the SVR of 4.5%, you can apply to move to the lower Managed Variable Rate.
If you are a new customer of ptsb... you shouldn't be. They treat their customers with contempt - for example, charging existing customers higher rates than new customers is totally without any justification.

If you are an Ulster Bank customer, you should not fix for 3 years.




Brendan

Good post Brendan.

With the benefit of hindsight, it is now clear that following your original advice not to fix for any period of more than one year at any rate over 3%, would have proved a costly mistake for many borrowers.

Trying to predict future mortgage rates is a fraught exercise and, in my opinion, choosing the "right" mortgage product very much depends on an individual borrower's circumstances.

I'd always recommend a borrower consider a mix of fixed and variable rates (especially if any increase in interest rate would put a strain on borrowers ability make increased repayments) - wouldn't suggest anyone fix 100%... for example using the BOI rates quoted above - say 20% of loan on variable rate, and 40% on each of 3 and 5 year fixed rates - would yield a blended rate of 3.32% and leave the borrower with 80% of their mortgage rate protected from increases...

Sarenco said:

With the benefit of hindsight, it is now clear that following your original advice not to fix for any period of more than one year at any rate over 3%, would have proved a costly mistake for many borrowers.

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Hi Sarenco

My very original advice not to fix at all was wrong. But I think that the amended version,based on your comments, was and is still correct. If they fixed for one year they would have got the savings. Then after the year was up, they could have fixed again at a rate lower than had been available a year earlier.

And I think that this advice still holds. If you can't switch from BoI, fix for one year.

Brendan

Bank Manager said:

...for example using the BOI rates quoted above - say 20% of loan on variable rate...

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I think it would be very poor advice for anybody to borrow any element of their mortgage @4.2% variable when there's a one-year fixed rate available @3.2%.

You would have to anticipate that the variable rate is going to drop very dramatically and very rapidly for that to make any sense.

I take the point that partially fixing your mortgage rate hedges your bets somewhat.

Sarenco said:

I take the point that partially fixing your mortgage rate hedges your bets somewhat.

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This well illustrates the problems caused by the very high rates in Ireland today.

Generally, it's not bad advice to fix part of your mortgage and keep some variable.
Generally, it's not bad advice to fix your mortgage rate if things are tight.
Generally, when ECB rates are so low, it's not a bad idea to fix your mortgage.

But these general rules don't apply when there is an expectation that Irish rates will be forced down through competition or law.

Brendan

Brendan Burgess said:

But these general rules don't apply when there is an expectation that Irish rates will be forced down through competition or law.

Brendan

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Hi Brendan, Is there any timeframe on when the forced rate change is likely? Less than 6 months, less than a year, 1-2 years?

Hi Billy

When I wrote the first version of this two years ago, I expected it to happen within the year.

Very hard to know.

Brendan

EBS variable rate is currently 3.7% for existing customers so I think fixing for 1 year is a reasonable gamble(I have done this for the last two years and will do probably do so again for another year)

Have to say - I think if anyone can make a saving by fixing for 1 year then I think it's probably worth it. On KBC you said its only 0.2% but that's €600 on a €300k mortgage.

Put that against the chances that in the coming months (with the Dail finishing up for Summer very soon) Michael McGrath's bill gets through and the banks actually reduce variable rates. How much do you think they will bring them down by initially? Fixing, for a year at least, when you can save money seems to be the best option to me