Reviewing BB's advice not to fix for more than one year

[Sarenco]

Brendan B offered his qualified advice last May that nobody should fix for any period over one year, at any rate over 3%, in order to escape a high SVR. So far following that advice would have proved to be a pretty expensive mistake and BOI would have to reduce their SVR pretty radically - and pretty quickly - to change the position. I can't see this happening but I guess time will tell.

 

[Brendan Burgess]

Brendan B offered his qualified advice last May that nobody should fix for any period over one year, at any rate over 3%, in order to escape a high SVR. So far following that advice would have proved to be a pretty expensive mistake and BOI would have to reduce their SVR pretty radically - and pretty quickly - to change the position.

Hi Sarenco

A very interesting point. I think it's worth reviewing recommendations made to see how they have worked out.


Which particular post are you referring to?

The recommendations in this Bank of Ireland post look correct in hindsight.

Bank of Ireland variable rate customers should consider fixing for one year

It's positively recommending people who can't switch to consider fixing. This advice evolved after the discussions on askaboutmoney, so it may have been a change in my recommendations. I do change my opinions in response to alternative views from other posters such as yourself.

I have always recommended to BoI SVR customers who can switch not to fix, but to switch. I would guess that, depending on LTV, this has been right most of the time, given that AIB variable rates are down to 3.55% and there are lower rates if you want to take the risk of being a KBC customer.

My general default position is that people should not fix. Most of the time that is right. But some of the time, it will be wrong.

 

[Sarenco]

http://www.askaboutmoney.com/thread...o-escape-the-very-high-variable-rates.194208/

Hi Brendan

I was thinking of this later Key Post.

Your advice at the time was certainly heavily qualified but I still felt that your core conclusion was a bit strong. At this stage, I think I would suggest that BOI customers should almost definitely fix to escape their SVR.

I don't necessarily disagree with your default position that people generally should not fix but the extraordinarily low cost of long term money at the moment makes the position less clear cut, in my opinion.

 

[Delboy]

Brendan B offered his qualified advice last May that nobody should fix for any period over one year, at any rate over 3%, in order to escape a high SVR. So far following that advice would have proved to be a pretty expensive mistake and BOI would have to reduce their SVR pretty radically - and pretty quickly - to change the position. I can't see this happening but I guess time will tell.

Could they not fix for 1 year, and then fix again for the same period after coming off that?
They'd be quids up v's SVR if going that route

 

[Bronte]

Brendan B offered his qualified advice last May that nobody should fix for any period over one year, at any rate over 3%, in order to escape a high SVR. So far following that advice would have proved to be a pretty expensive mistake and BOI would have to reduce their SVR pretty radically - and pretty quickly - to change the position. I can't see this happening but I guess time will tell.

But a) it was 'qualified' advice.
b) what would have been your advice at the time
c) what if interest rates went up
d) what if they went down

Isn't the issue that each person's case is individual and that they have to work out all the options, but nobody has a crystal ball, so all any of us posting on here can give is our best advice based on years of dealing with mortgage or being an accountant or landlord or solicitor or banker. And the people reading have to try and fit that advice to their own case. Which is actually the beauty of this website, you get advice from a range of people, that we try to tailor to their own situations if they are willing to come on and post it, and if not, they have to work out what is best for them.

 

[Bronte]

My general default position is that people should not fix. Most of the time that is right. But some of the time, it will be wrong.

Just on this point you have been very consistent on this, and I'm a fan of fixing myself, and have always done so. And it has cost me. As you rightly pointed out. But it has helped me in reassurance of rates because of my age, when I started out rates were nearly 20% for people with Irish life. As it happens, I'm currently on 2.4% on a home mortgage, (not Ireland) my fix is up in August, and my fingers are crossed that Donald Trump or terrorism or Brexit don't turn the whole world topsy turvey and the ECB stays low and I'll fix for another 3 years. I also have a 5 year fix, 1 year into it, an Irish fixed rate, special low one (not normal mortgage but a commercial loan), under 3% on an investment and that will see me as far as not caring what interest rates do.

Nobody but nobody can call interest rates, there was a period of uncertainty when the whole banking system seemed to collapse that nobody knew what is going to happen. Actually having listened to so called experts for most of my life, they haven't a clue either and are no better than a novice like me.

 

[Brendan Burgess]

I still felt that your core conclusion was a bit strong.

Hi Sarenco

This was my core conclusion which was certainly strong, but was it not also correct?

If I remember correctly, my initial thoughts were that people should not fix at all because rates were so high. You, and others, pointed out the maths of how much rates would have to fall to justify this so I changed my position and recommended that people who could not switch should consider fixing for one year.

Leaving aside the qualifications in the above piece, I think it's correct. In particular - I pointed out that the decision was much more complex for those who can't switch lenders. Which is probably Bronte's point that the decision is different for everyone.

I am disappointed that rates have not fallen more as a result of our campaign. But I am still hopeful that they will fall further.

Even if the above strong advice has turned out to be wrong in some cases, the overall post seems to be to spot on, and if I may say so myself, particularly well laid out.

If you are paying a high variable mortgage rate, you may be able to bring this rate down by switching lender.
Before switching, ask your current lender for a lower variable rate.
If you do decide that you want to fix immediately, then see if another lender has a cheaper fixed rate.
If you do decide that you want to fix immediately, fix for as short a period as possible.
Remember: If you fix, and you later want to move home, you will have to pay an early repayment penalty.

 

[Brendan Burgess]

The complication for Bank of Ireland customers for some part of last year, was that they could fix for a minimum period of two years. This is what I said in this post :http://www.askaboutmoney.com/threads/i-cant-switch-lenders-should-i-fix.194634/

"BoI - the difference between the SVR of 4.5% and the two year fixed rate of 3.75% is significant, so it's probably correct to fix. However, if you can afford to, you should hold off fixing until you see if the campaign succeeds in reducing the rates further. Holding off will cost you €60 per month per €100,000 borrowed. If you are struggling with your repayments, then you should fix immediately."

I see from reading on in that thread, that I did the maths based on your comments.

"I think a Bank of Ireland customer should fix, but not yet. I hope that the Minister for Finance is not happy with the rate cuts announced and that he will put pressure on all the banks to reduce rates further. It may then be correct to fix."

So someone who did not fix at all has lost money, so far and probably will be behind at the end of the two year period. I think that they should now fix at 3.65% for one year if they are over 90% LTV. If they are below that, they should switch from BoI.

Brendan

 

[Brendan Burgess]

I'm currently on 2.4% on a home mortgage, (not Ireland)

Hi Bronte

If Irish lenders charged fixed rates at the same level as in other Eurozone countries, I would review my advice. Long term low fixed rates would be well worth considering.

Brendan

 

[Sarenco]

"I think a Bank of Ireland customer should fix, but not yet. I hope that the Minister for Finance is not happy with the rate cuts announced and that he will put pressure on all the banks to reduce rates further. It may then be correct to fix."

So someone who did not fix at all has lost money, so far and probably will be behind at the end of the two year period. I think that they should now fix at 3.65% for one year if they are over 90% LTV. If they are below that, they should switch from BoI.

That's really what I was getting at Brendan and I think we are now in violent agreement.

At the time, June 2015, my view was as follows:-

"Personally if I was on a 4.5% SVR rate with BOI and was unable to switch to another provider, I would be sorely tempted to fix for 2 years at 3.6% (or 3.7% for that matter). BOI could certainly reduce rates further but they would have to do so relatively quickly (unless the further cuts are very substantial) for a borrower not to still come out ahead. Equally they could raise rates during the 2 year period..."

Of course it is now possible for a borrower with an LTV>80% to fix for one year @3.65% and I agree that this is probably the best option for a borrower on BOI's SVR that is not in a position to switch lender.

 

[Bronte]

I am disappointed that rates have not fallen more as a result of our campaign. But I am still hopeful that they will fall further.

I think it's had an influence. It's certainly made it into the newspapers and been picked up by them and got people writing articles about it, and the radio stations too. But at the end of the day BB, if customers aren't willing to try and influence it in numbers what else can be done.

 

[Bronte]

That's really what I was getting at Brendan and I think we are now in violent agreement.

.

Is that not a tad strong, we are talking interest rates, not politics, don't you just disagree rather than taking it to a whole new level with that word?

 

[Brendan Burgess]

Hi Bronte

He is pointing out that we actually strongly agree with each other.

Brendan

 

[Sarenco]

Is that not a tad strong, we are talking interest rates, not politics, don't you just disagree rather than taking it to a whole new level with that word?

Hi Bronte

I think the point is that we don't disagree at all.

The phrase "in violent agreement", as I understand it, refers to a situation where two people debate a point without realising that they are actually in agreement with each other.