Approved for a mortgage. De we fix for 3/5 or 7 years or not at all?

Well as the above says we've been approved for our first mortgage with Ulster Bank. Our options are to choose a variable rate of 4.3% or to fix for 3/5 or 7 years with rates of 3.85 3.9 or 3.99 respectively. We initially thought to go with fixed for 7 years and then maybe pay off a small lump sum. (All going well). Since then others have questioned our decision saying we should choose 3 year or not fix at all. I'm wondering does anyone have any advice as we are lost at present. Thanking ye.

5-7 years fixed is too much IMO. Id go 2 years. 3 max. My two cents. Note that variable will likely come down rather than go up in the short to medium term.

Have you considered a mix? e.g. 25% variable - 50% 3 year and 25% 5 year.... protects 75% of your mortgage against interest rate increases and leaves some on variable in case you wanted to make a lump sum reduction (if you want to make a lump sum reduction on a fixed rate mortgage you are likely to incur a breakage fee...

{above percentages are only a suggestion - you could pick a mix that suits your circumstances}

Are there any downsides to split mortgages as described above, apart from the usual conditions attached to fixed rates and the unpredictability of variable rate movements ? Seems like a good way of hedging one's bets ? Also, are split mortgages readily available from the main banks ? Do they impose any restrictions or qualifications on the portion of a mortgage assigned to fixed or variable rates ?

I'd think of it like this: insurance is a very profitable business on average. The bank is offering me insurance against the interest rate rising, at a cost of €1000-1500 per year. If I can afford to take on that risk myself, that 1000-1500 would be much more usefully employed paying down principal (and I'm also exposed to the possibility of SVRs falling).

If I can't afford to run the risk, then then I'd think again about the affordability of the mortgage. I'm not interning at a hospital or barristers - my income isn't going to rise that much in the next 3/5/7 years.

Ok I'm afraid this may need to be simplified for me. Im not trying to be obtuse, I genuinely don't understand the advice being offered.
We realise that the rate could lower and we'd be stuck with 3.9% for the 7 years but I figured that you can't begrudge the lower rate to others. For us the 3.9% seems low enough.
And if the rates rise then we'll be very happy with our 3.9. Our repayments won't be very high- 460e per month. (Without insurance).
Am I being very naive?

No worries. Are you comfortable giving some numbers? You might get some more concrete answers.

• How much are you looking to borrow?
• What's the term on the mortgage Ulster Bank are offering (typically 20/25/30 years)?
• How much can you reasonably afford to pay back per month?
• How much could you afford at a pinch (while you continue to eat and keep the lights on)?
• Any reason to think your income will rise or fall significantly over the next few years?

No problem.
The term if 30 years.
Amount is 94,000 or 90%
We have comfortably paid 650e rent in the past while also saving between 500 and 700e a month. We have 2 children. One in childcare for another year. One in school.
Both our jobs are secure. Husbands wage will stay the same. Mine could increase slightly. By maybe 2000-3000 a year.
With the 7 year term we were hoping to save a Lump sum to pay off at the 7 year mark, while also saving for future college expenses/ home improvements and rainy day fund.

I wouldn't fix at all if I were in your shoes. On average, variable rate mortgages work out cheaper. In your case because you can afford to repay so quickly, the case for a variable rate is even stronger. By starting to "overpay" the mortgage on day 1 rather than after 3/5/7 years, you can save even more (up to about €10000).

IMO the only reason to fix is if you couldn't afford higher interest rates. The highest interest rate that Ireland has seen in the last century is around 16%, and you could survive even that.

rolleregg. I would not be inclined to fix if I was in your shoes. I have looked at your posts and you seem to very disciplined with your finances. I would be very close to "trasneoir" on the advice given. You have stated that you have comfortably paid €650 rent previously and saved money as well. Your mortgage will be approximately €465 pcm @ 4.3% over the 30 years. You could overpay mortgage each month by paying the €650 for example that you are now paying rent. This would have make a very big difference over a period of say 7 years. At all times you would have the flexibility of reverting back to your normal monthly repayment. I am not very knowledgeable on how Ulster Bank deal with this but AIB were quite easy to deal with when I did. By the way every overpayment reduces your monthly payment. Just check with your bank how you/they deal with overpayments. Well done to you. Hope you are happy into the future.

Ah crap. At what stage is it too late to not fix? The mortgage pack has been sent to our solicitor, who is due to call us before weeks end to sign the contracts. I thought this was most sensible option. And mortgage broker didn't suggest any different. If it is too late to change would it just be advisable to let it go and save like hell to pay it down in 2022? God that's seems like a long way away.

Thanks for the advise by the way. We live in the middle of the country so houses aren't as expensive as elsewhere. My job allows for the minimum of childcare and we don't take holidays Etc due to young children so it allows us to save without being completely frugal. Also I was a financial idiot in my late teens/early 20's but thankfully learned from my mistakes

It's not too late. As you haven't signed the mortgage pack, you can request a new one from the bank. Then you can sign the updated pack at the solicitors.

You have crossed the big hurdle rolleregg by being approved so do not panic. Do as PTSBCase says. Most of us were idiots in some way or another in late teens/early 20's if we would only admit it.

In the same boat. I've been offered:

Variable @3.85%
2/3 years fixed @3.80%
4/5 years fixed @3.90%

I don't think I'll be in a position to pay off any extra early on but would I still be better off with a variable?
I suppose I can fix at any time anway.

Very difficult to second guess the future but if it were my own call I would stay on the variable. You may not get rich or poor on the difference but might be worth the gamble staying on the variable.

I'm in a similar situation to the OP rolleregg.

Bank of Ireland mortgage, just over €400k outstanding, 30-year term, on 4.55% variable. Repayments were too high so we were on a partial-principal arrangement for a while. Just came off that, so now back on full principal, but with a new deal that extended the term from 25 back to 30 years in order to make it affordable.

Separate to that, I wrote a letter complaining about the rate, and I was pleasantly surprised that they called to offer alternatives. (Happy to share the letter if it would be useful to anyone.)

Here's what they've offered:

• 4.2% variable
• 3.8% 1yr fixed
• 3.85% 2yr fixed
• 3.95% 5yr fixed

We were hoping to move to KBC soon anyway, once we have can show six months of clean full repayments on our application.

If we do aim to move later in the year — since KBC's switchers deal is live until December — is there any downside to fixing at 3.8%?

Is there any advantage to taking the two-year option at 3.85%?

Thanks in advance!

giddings said:

We were hoping to move to KBC soon anyway, once we have can show six months of clean full repayments on our application.

If we do aim to move later in the year — since KBC's switchers deal is live until December — is there any downside to fixing at 3.8%?

Is there any advantage to taking the two-year option at 3.85%?

Click to expand...

Hi giddings,

if you fix you will be unable to move the mortgage during the fixed term without paying a breakage fee. If you intend to move then you would be best off choosing the cheapest variable rate you can get from BofI for now and switch bank when you are able.

You'd be mad to fix - Variable rates are going one way...down