which mortgage should I go for?

Hiya I have to decide after having a fixed rate mortgage for two years what Im going to do for the next five!! have no idea whether I should go fixed or tracker. The ECB is planning on dropping it's rates by the end of the year isn't it. Do they increase or decrease the rates during a recession?

go floating (ECB) as the fixed rates are picking up all of the funding premium that banks are charging each other at the moment (the reason why the likes of PTSB, First Active, etc have increased their mortgage rates in recent weeks despite no increase in ECB rates). The funding premium in 5 year is approx 60bps. This is the premium that a AA rated bank would have to pay to raise 5 year funds through some form of debt issuance.

Going with ECB rate is where the Bank cannot unilateraly increase your rate over ECB, although they can increase the rate they charge for new lending. I don't know how long NIB will continue to offer ECB+50bps (all in 4.50%) for LTV of 50%, or 4.59% for LTV of 80%. They would appear to be the cheapest in the market at mom.

I would tend to agree that ECB will most likely cut before they increase rates, but don't be surprised if the 4% ECB level could still be there in 9 months time as long as Inflation stays so high.

marksa said:

I don't know how long NIB will continue to offer ECB+50bps (all in 4.50%) for LTV of 50%, or 4.59% for LTV of 80%. They would appear to be the cheapest in the market at mom.

I would tend to agree that ECB will most likely cut before they increase rates, but don't be surprised if the 4% ECB level could still be there in 9 months time as long as Inflation stays so high.

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Can I say that marksa's advice here regarding NIB's LTV product is absolutely correct.

If you qualify you should grab it, as it is definitely the best in the market at present.

However, most brokers will not present NIB as an option, as NIB do not put business through Brokers.

As a matter of fact, some brokers actually argue that NIB LTV tracker is not the cheapest option for qualifying borrowers, even going to the extent of comparing NIB APR rates with Halifax's notional non-APR rate, see here

1. Joe Says:
April 5th, 2008 at 10:12 am

Of course you - and other brokers - don’t deal with NIB - therefore ruling out the lowest rate mortgages for all borrowers with less than 80% LTV.

2. Karl Deeter Says:
April 7th, 2008 at 8:17 am

Hi Joe, actually Halifax have a rate of 4.4% for 12 months which then goes to 4.6%. The very best NIB Rate is only 4.6% and to avail of it you have to have a loan of less than 55% to avail of it, so while your point about brokers not dealing with NIB is true the rest of it is wrong. Brokers can still place business with huge savings. And NIB will not do you any special deals on house insurance or mortgage protection either, something which a broker can do, you have to look at the total cost of a loan to get a truly accurate picture of expense although rate is indeed the biggest deciding factor.

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Of course the truth is that NIB's APR rate is 4.6% APR, for someone borrowing 50% LTV or less, while Halifax offer at best 4.67% APR for a similar customer.

Well how long will Halifax continue to offer 4.67apr when their sister company BoSI has hiked rates last week by 40-55bps? As has been echoed around, if you can get an ECB+ indexed rate at sub 80bps with your existing lender then go for it, I doubt if it will be around long.