Which mortgage rate to choose?

I am due to come off fixed rate mortgage in February (3.95% staff preferential mortgage subject to BIK) the rates I have been offered are:-

1) 4% fixed on whole amount (subject to BIK) - once off offer (ie. I cannot opt out of this at a later date and then opt for it again - can only opt for 3 x salary @ 4% in future)

2) 2 year fixed rate @ 4.75% (not subject to BIK)
3) Variable LTV Rate currently 4.5% (not subject to BIK)

I know the rates are likely to fall in the coming years but would I better taking a longer term view and opting for the fixed 4% rate for the life of the mortgage?

Any advice appreciated.

ECB rates may well fall again - but the variable rates don't have to fall in line with ECB cuts. They have the last 2 times - but that may not continue for future cuts.
The 4% fix sounds the best to me.

It depends on whether you plan to sell the property during the life of the mortgage. If you don't intend selling then I'd bite the hand off anyone giving 4% fixed. What would the BIK liability be on this rate?

Just a question....have you checked what are the penalties(if any in your case) for breaking the fixed term?

Real interest rate = rate applied minus inflation

With inflation averaging at approx. 3.5% over the past 15 years (actually higher for past few years) if this were to continue in the future it would effectively that the REAL cost of your loan would be very close to NIL.

Even though there is potential deflation forecast for the coming 12-18 months- if I was offered a long term guaranteed interest rate of 4% I would be taking the maximum loan possible based on economics it is a no brainer.

Best of luck with it- you are in quite a lucky position

Its actually 4% variable but the rate would never change from 4% so it would not effect me selling the property before the end of the term. The BIK rate is the difference between the preferential rate and 5.5% - currently costs me about 60.00 per month taken as tax from my salary. Think I will go for that so - thanks for the advice.

WinniePooh said:

Its actually 4% variable but the rate would never change from 4%

Click to expand...

So it's 4% fixed then but without penalty for redeeming early?