<50% LTV. Am I mad to be considering 5yr fixed rate?

BananaRepublic

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It would be great to hear some of your opinions are on what I should do please. What would you do in my scenario?

I am currently on a variable rate of 3% with EBS. I have 300k outstanding on mortgage, the LTV is <50%. The term remaining is 30yrs. I've been fortunate enough to be in a position to overpay 600euro a month (I'm pushing this overpayment via standing order as opposed to having changed my terms with EBS).

I am considering moving to BOI's 5 year fixed deal, interest rate they're offering me is 3%.I understand overpayments allowed are limited if switch to fixed and so if switching I'd look to take out a shorter term mortgage so effectively the monthly overpayment that I have been making would be rolled into the new monthly commitment.

The Pros and Cons as I see them are;

Pros:
> *IF* rates don't decrease, I'd be up €5,500 from the 9k cashback (€6k now + €3k in 5 yrs) after I pay 1200 x 2 on solicitors to move to BOI now and from them in 5yrs (I would not stick with BOI after the term considering their non-competitive variable rates)
> Would be better off on 3% fixed if variable rates go up.

Cons:
> In moving, if I was also to reduce term to overcome overpayment constraint i'd loose the flexibility of being able to fall back to the lower about that i'm committed to currently
> Possibility that rates will decrease following the pressure the banks are under to align to the rest of Europe but I'd be be locked in until 2022.

Am I mad to fix for 5yrs considering I'm in a fortunate position to have lots of options given my low LTV.

Thank you very much for your words of wisdom
 
> Possibility that rates will decrease following the pressure the banks are under to align to the rest of Europe but I'd be be locked in until 2022.

That is the key point why I would not fix for more than one year.

Why not fix for one year and then switch again after that if rates fall?

It's not just variable rates which are way higher than the rest of the eurozone, it's also fixed rates. I would expect that at some stage both variable and fixed rates will come down.

Brendan
 
Good point. I'll look at fixing for 1 yr and reassess then. I was thinking initially of locking in for 5 yrs as thought the rates were likely to rise. Hopefully Ireland follows UK banks in there announcement this week to lend at below 1%. Wishful thinking !
 
We are all paying the price for the banks' busted balance sheets; mortgage rates are higher here and deposit rates are lower. I would not fix. For reference, I am paying 3.1%.
 
Thanks Gordon Gekko. When you say you wouldn't fix do you mean you wouldn't fix at all at all or just not for 5 yr term? I'm half tempted to move for the cash back and then move again in a year. Interesting to hear others opinion. Thanks
 
I wouldn't fix at all

In fairness, if you do go with BOI I think you would want to fix for at least 1 year and review the situation again in a year's time. I was weighing up the options with BOI too and I've decided to fix for 1 year and hope for a better deal next year. It's worth noting that you'll probably get a better rate on 3 year fixed with BOI (about 0.1% better I think) over their 1, 2 or 5 year fixed rates.
 
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