Capital payment brings LTV below 80%; BoI not reducing fixed rate

[bellview]

Hi

I have a question that I have put to my bank and before I accept the answer from the bank rep I want to check if its correct...

I will use numbers (not real) to explain scenario... assume house costs 200k

Last year we bought our home for 200k. when I took mortgage it was for 20 years & it was for 180k (90%). as the fixed rates offered by my lender were better than variable I did the following

1. fixed for 2 years 150k
2. variable 30k.

during the year we have made our payments and now I would like to make a lump sum payment (against the variable) for 20k.

when I make this payment my LTV will be less than 80%. the bank are saying they will give me the better rate on the LTV less than 80% rate on the variable only. they will only offer the lower LTV rate on the fixed element when the fixed rate expires in one years time

can the bank continued to treat the fixed part of loan at higher LTV loan rates when under 80%. My reason for question is the same bank has changed its fixed rates to all customers so fixed is not really fixed.

appreciate any thoughts & if there is an independent body that I should speak with

 

[newirishman]

Fixed rate means just that: fixed for the agreed period. It doesn't matter if you LTV changes, if only parts of your mortgage are fixed, you extend the house, or anything else.
It doesn't matter if the bank now has changed their fixed rate offering, they are for new contracts and not for your existing contract.

If a fixed rate would be allowed to change, it wouldn't be a fixed rate - and this is always in relation to your mortgage agreement, and not to whatever else the bank might offer.
If you draw down a mortgage with a fixed rate of x% today, and tomorrow the bank changes their fixed rate offering to say x-1%, it will not have any impact to your contract.

You always have the option to "break out" of your fixed rate agreement though, of course subject to any break clauses (which will be outlined in your mortgage contract)

 

[Monbretia]

The fixed part is fixed and cannot be changed until the end of that fixed rate term. That is the definition of a fixed rate as such, you agreed the rate for a fixed term. You could break out of the fixed rate and pay the penalty if you wanted but that's hardly viable.

The bank would have changed its fixed rates for new borrowers or existing borrowers moving to a fixed rate, i.e. new contracts. It will not have changed any fixed rate of a customer already in a fixed term, it can't do that. If they could they wouldn't be fixed rates.

And if it could be done what's to stop them increasing a fixed rate mid term, would customer ever agree to a fixed if that was the case.

Edit - newirishman, practically identical thinking there posting at same time

 

[Brendan Burgess]

I presume that you are with Ulster Bank?

They are the only lender that brings down the rate for those who bring their LTV down below 80%, so they are treating you much better than any other bank.

As the others have pointed out, fixed means fixed.

It's another reason why people should avoid fixed rates. If they pay off a lump-sum they don't get the benefit of the lower LTV, and will usually be hit with an early repayment penalty.

Brendan

 

[bellview]

I presume that you are with Ulster Bank?

They are the only lender that brings down the rate for those who bring their LTV down below 80%, so they are treating you much better than any other bank.

As the others have pointed out, fixed means fixed.

It's another reason why people should avoid fixed rates. If they pay off a lump-sum they don't get the benefit of the lower LTV, and will usually be hit with an early repayment penalty.

Brendan

thanks all for responses all very helpful...my guess was I was 'fixed' but wanted to ensure I was 'fixed'... sorry not with Ulster... I'm with BOI. the good news part is I can get the variable rate down to lower LTV now albeit the variable is relatively small when compared with fixed element... and i suppose 12 months won't take that long to pass to get lower LTV rates when I exit the fixed element next year. the reason I went fixed for 2 years was to get away from the crazy high rates that were charged on variable early last year

 

[44brendan]

the reason I went fixed for 2 years was to get away from the crazy high rates that were charged on variable early last year

Exactly!! You made a sensible decision to fix a large portion of your mortgage in order to ensure certainty of payments for the FR period. You entered into a contract with the Bank for the duration of that period. Obviously if rates had increased in the interim you would want to hold on to the FR for the full term but as they had decreased you would be more inclined to exit the FR earlier.
This would be somewhat similar to paying your annual health insurance and then looking for a refund when you didn't get sick!

 

[Sarenco]

You made a sensible decision to fix a large portion of your mortgage in order to ensure certainty of payments for the FR period.

I don't disagree with the substance of your post but I suspect the primary reason Bellview fixed was to escape BOI's high SVR, rather than to ensure certainty of future mortgage payments.

 

[Brendan Burgess]

when I make this payment my LTV will be less than 80%. the bank are saying they will give me the better rate on the LTV less than 80% rate on the variable only. they will only offer the lower LTV rate on the fixed element when the fixed rate expires in one years time

Have they put this in writing to you? Have they actually reduced the rate?

I was not aware that Bank of Ireland reduces the rates when someone reduces their LTV. I have never seen a public statement about it.

I presume that if you are on an SVR of 4.5%, you can fix at the current LTV rate. But they won't officially allow you switch to a lower LTV variable rate unless you threaten to switch.

Brendan

 

[Bronte]

Bellview what is your fixed rate and what is the less than 80% rate. How much would it make a difference to you if you got the better rate, over the remaining term of the fixed rate. If you've a low mortgage and the rate difference is not much then we may not be talking a lot of money. What you can do now is continue you save and have another lump sum to pay off the fixed portion in a year or so's time.