Tracker dilemma...

Hi,

I have a tracker mortgage with EBS, at a rate of 1.99% and the mortgage has roughly 20 years left. I understand and appreciate that this is still a very good rate, but with the recent headlines about a potential series of ECB interest rate increases, that rate of 1.99% could quickly jump to 2.50% or maybe even 2.75% within a year or so... and potentially even higher again after that.

With a tracker at 1.99% and the ECB rate currently at 0% since 2016, it appears there is only one way this rate will go - so the current rate of 1.99% seems to be the best I'll ever get out of this tracker rate, as the ECB cannot go lower than 0% (I think).

I've noticed 20 year fixed rate mortgages with some of the new lenders, and since I have a low LTV I could secure a rate of 2.50% for the remaining term of the entire mortgage, 20 years. And this fixed rate is only 0.51% higher than what I'm currently paying.

I suppose the question is... does it seem crazy to throw away a tracker of this rate (currently 1.99%) to trade it for the peace of mind that 2.50% is what you would consistently have for the next 20 years? Even if the ECB rate rose up half a percentage point and then went down to 0% again, I could live with that knowing I'm only 0.5% away from the rate I had. It's trying to avoid the "normal" interest rates of 3% (and higher) over the next 20 years that I'm trying to avoid, so the idea of a fixed rate at 2.50% doesn't seem like such a bad idea... but I wonder what I'm missing in the bigger picture here.

Any thoughts?

Thanks.

fixxation said:

I suppose the question is... does it seem crazy to throw away a tracker of this rate (currently 1.99%) to trade it for the peace of mind that 2.50% is what you would consistently have for the next 20 years?

Click to expand...

It certainly doesn't seem crazy to me.

This recent discussion may be of interest to you -

1.99% tracker is NOT a "very" good rate in terms of trackers.

You can beat that with a fairly standard 3 year fixed with Avant. Even PTSB are just slightly higher at 2.05% for 4 years

the market is pricing in about 1.1% rise by end of year and long term the ECB has stated (Lagarde today) that long term they want inflation at circa 2% and interest rates neutral to that. That suggests the ECB is looking at a 1.5%-2% as a long term target but has not ruled out having it higher at points to curb inflation.

To put it in figures. On a 20 year term, each 100,000 of a mortgage will cost €506 @ 1.99%
at 2.5% it is €530,

So if you have 300k balance, you can pay 1518 per month with a risk of rising to €1900/ month if ecb went to 2.5%
Or on 300k, fix at 2.5% and have the absolute certainty that your mortgage will be 1590 per month no matter what happens.


I'm on a 0.95 tracker and only that it has just 4.5 years to run I'm not looking at fixing. But if it had 10 years to run, I'd be looking at it. On a 1.99% tracker, I'd be on the starting blocks and switching asap