February 2, 2011 at 4:52 pm #10936mammycoolParticipant
With all the talk today about the Permanent TSB putting up the interest rate, we have been looking at our mortgage. We currently have a fixed rate of 4.9 up until the end of May.
We would love to fix for another 5yrs. The rate at the moment is about 4.64. I spoke to the bank about changing but fixing at the current rate – they say that we would have to pay the breakage fee to get the new rate. The breakage fee today is 1046eur. We only have four more months at the old rate – so there would be no benefit in breaking the contract.
We are concerned that if we wait until May – the rate will have gone up and we will end up on a higher rate. Do you think it would be advisable to wait it out and hope the rates do not jump? or another option might be to extend our current fixed rate to 10 yrs – would we be able to do that without incurring a charge or them uping the rate?February 2, 2011 at 6:12 pm #109071AnonymousInactive
Hi Mammycool, we moved a copy of this thread over to financial expert, hopefully Dave from Financial Companion can help on this one.
Dave – over to you, thanks.February 2, 2011 at 6:41 pm #109072
Im looking for advice on this too, i have an offer to fix for 5 years at 4.95% (APR 4.5%) DH thinks we should fix for 3 years but im thinking 5
The cost of repayments are as follows
APR RATE% REPAYMENTS
4.0% 4.20% X27 euro 1 years fixed
4.1% 4.30% x35 euro 3 years fixed
4.5% 4.95% x86 euro 5 years fixed
I havent a clue…. but was thinking of going more along the 5 years, our payments are x31 euro per month at the moment, so dh wants the 3 years as the payments will be still around the same as we are paying at the moment but fixed for 3 years
All advice welcomeFebruary 2, 2011 at 8:47 pm #109081
Thanks Admin, I might have missed that 😉
Mammycool, firstly, I’ll try not to use bad language at a lender wanting to charge so large a penalty with just 4 months to go (but they have to make up for their losses from somewhere!). If we knew exactly what the fixed rate will be on offer in 4 months, we could calculate whether it would be more economical to pay the penalty or wait (depending on the size of your mortgage), unfortunately without knowing exactly what it will be, there is an element of guess work. When your fixed rate expires, you will have choices of other fixed rates and also variable rate. Extending your existing would be just breaking your existing and taking a new one. The only way you would want to pay the penalty in this case, is if you knew that the saving between taking the rate on offer now, compared with waiting for what will be on offer in 4 months and spreading it over the new fixed term, was cheaper but without that knowledge, there is no way to be sure. Fixed rates are driven by the lender’s expectation of how rates will move in future. I can’t imagine enough of a jump in the next 4 months to justify paying that level of penalty, but it is down each person to decide on that risk.
Taylor, yours is a little more easy to guage because you know what is on offer at present. What isn’t known, is what will be on offer when the options expire in 1, 3 and 5 years. Some people would rather pay an extra €100 per month for the next 5 years, just to be sure that there was no possiblility of a greater increase during that time. Of course if rates didn’t go up, they would have been better off on a shorter fixed term, but it’s the peace of mind that is being paid for! The other thing to remember, similar to mammycool, is the penalty if you have to break a fixed period. This could be if you had to move home or even wanted to pay off a lump sum while on a fixed rate, so if either of those was a possibility, fixing for too long may not be the best idea. Decisions on whether to fix or for how long are really (should be!) driven by each couple’s personal circumstances. So if someone’s income could comfortably sustain an unexpected increase, fixing shorter or going variable might suit, However, if someone is watching their budget closely, they may prefer to fix for the peace of mind. Hope this helps, as ever feel free to ask any other questions. Dave.February 2, 2011 at 11:08 pm #109100
I know, but my bank, if you pay extra putsthe money into a fund until it reaches a % of the loan…. I would fix for 10 years if i could, as not many years after that left on mortgage, i just love the peace of mind!!
I think its listening to the men i worked with back in the 90’s with 17 and 18% rate…. some even fixed for YEARS AND YEARS at those rates, ouch!!!
Cant see us selling up, have been variable for the past 2 years and i feel like im living on my nerves, now i know why i would never make it as a gambler 🙄February 3, 2011 at 10:12 am #109117
Yeah, those rates back then were scary! They were due to the stirling crisis and before we were locked into a single currency, there should be no way that those rates can be repeated as we are now. For the peace of mind factor, 5 years might be more appropriate for what you are saying. It’s very hard to know what you may need to do in the next 10 years and hopefully things will stabilise economically in 5 years time. Again, it’s a very personal decision how long to fix for but certainly 5 years is peace of mind for a reasonable time! Feel free to email or ring me if you want to go through any specifics in more detail. Dave.February 3, 2011 at 3:29 pm #109152
Just to add to those comments, the longer there is to run to the end of a fixed rate, the higher potential penalty there is. The penalties are calculated based on movements in rates from what the bank secured on the wholesale market to secure it for your fixed term, to what they may be know, but basically, the banks have discretion, and in these times it does seem they are keen to "make" any money that is going!
And just a reminder if you are on an ECB tracker variable rate, for example ecb rate (currently 1%) + 1.1% (equalling 2.1% at present) it would be very unwise to move from it with the ecb rate being so low (and even with any potential increases in the next couple of years, still likely to be the best option.) Some lenders have been contacting customers to offer them "great" fixed rate offers!February 3, 2011 at 3:45 pm #109154
Seen one of the english banks have a very fancy advert to try and panic people into switching from trackers…February 3, 2011 at 3:53 pm #109162
Seen one of the english banks have a very fancy advert to try and panic people into switching from trackers…
Yeah Taylor, I wouldn’t be surprised to see a bit of scaremongering here to make people think ecb rates are going to shoot up to scare them into switching to fixed rates!February 3, 2011 at 3:59 pm #109166
They didnt change it today held it at 1%,….. but that wont stop the banks upping as they are running at a loss on mortgages
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