Mortgage - Variable or Fixed? Help!

HCMC

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Hi

We have just got a bid accepted on a property.


The purchase cost is €650k, we are contributing cash €150k, which leaves a mortgage amount €500k (LTV 77%)

We are holding back about cash savings of €40k for contingency


The mortgage lender (KBC) is offering a 28 year term with fixed or variable rates, with the option of a split between fixed/variable rate.

The options available are listed below;

·50% Variable (3.99%/4.06% APR) & 50% 2 year fixed (4.49%/4.18% APR): €2,545
·50% Variable & 50% 3 year fixed (4.75%/4.31% APR): €2,585
·50% Variable & 50% 5 year fixed (4.70%/5.25% APR): €2,657

If we chose for 100% of the Mortgage to be repaid on a variable basis, the current monthly repayments would be €2,475 (based on current rates)

We are hoping to get your opinion on what option you think may be best, obviously there is a large element of speculation in relation to the variable rate option, and a strong likelihood that the variable rate will rise given the current ECB rates are at an all time low.


Thanks
 
Last edited:
A couple of thoughts:

- that rates are at an all time low doesn't mean they won't continue at an all time low. Past performance is no indicator of future performance

- wouldn't the ECB rates have to shift by quite a lot in order to cause varible rates to overtake current fixed?

- I read somewhere recently that German economy is improving which means low rates.

- I've always thought of fixed rates as a bet against the bank. As with any kind of betting, a punter with no real clue of the terrain is cannon fodder.

- it's much more interesting to ride the variable rollercoaster. The 5 years will be gone in a blink.
 
From a long term view, you will always pay less in total if you stay on the variable rate. Obviously you will have the ups and downs in rates during that time.

Then there is the comfort side, knowing exactly what you will pay no matter what. The potential cost of that comfort is that you pay more than someone with a variable rate.

You'll only know which is the best option at the end of the fixed period. Unfortunately no one has a crystal ball to see what rates will be like at that time.

Steven
www.bluewaterfp.ie
 
Just a suggestion having experienced the terror of a rapidly climbing variable rate and then the relief when it dropped back down culminating in delight when it settled below the original rate. If you do decide to choose the variable rate tell yourself that you chose one of the two more expensive fixed rate options, then put the difference aside earning you some interest (even the credit union) then if the rates start to rise, you have the money and haven't committed it to any other borrowings (unlike me) and if the interest rate drops further you gain.
 
Dear all

Apologies for the delay in reverting, KBC reduced their fixed interest rate by 50 bp's so we decided to go with a split rate 90% fixed/ 3 year variable rate.

Thanks again!
 
I've been reading this thread with interest as I will shortly be having to make a call on whether to go fixed or variable repayment on a small mortgage we've secured with AIB. The mortgage is €60k over 14 years & rates as follows:
Variable : @4.29% - monthly repayments = €475.68
Fixed 1 years : @3.5% - monthly repayments = €452.27 (-€23.41 per 1/12 )
Fixed 2 years : @4.6% - monthly repayments = €485.06 (+€ 9.38 per 1/12 )
Fixed 3 years : @4.8% - monthly repayments = €491.17 (+€15.49 per 1/12 )
Fixed 4 years : @5.0% - monthly repayments = €497.32 (+€21.64 per 1/12 )
Fixed 5 years : @5.2% - monthly repayments = €503.52 (+€27.84 per 1/12 )

On the face of the above, we're considering a number of options -
1. fix for 1 year - potential saving of €281 over the year, assuming variable rate goes no further down - why choose variable with a possible saving for going 1 year fixed ? - unlikely that variable will dip to the 3.5% on offer for 1 year fixed ?

2. fix for 2 years @4.6% - additional outlay over period of 225.12, but only a saving if if interest rate were to rise by >.3% - seems a possibility ??? we wouldnt be inclined to fix beyond 2 years - crystal ball gazing territory there !

3. stay on variable @ 4.29% and , as suggested elsewhere in this thread, and overpay mortgage at, say, the 3 or 4 year rate (4.8% /5%) ?
We understand the mortgage amount is small , likewise savings in opting between various term rates) in comparison with larger mortgage amounts where the repayment choices make for more significant savings etc, but I would be glad of any comments, advice etc.
 
In my own life experience having been borrowing for longer than I care to remember my own personal preference I would go for the SVR. The Banks have factored in a risk cost into giving the fixed rate and the customer pays. With the SVR mortgage you are free to make lump sum payments whereas the fixed rate mortgage is very inflexible in this regard. Yes it does give you peace of mind but I consider this to be at a price. Ultimately it is a personal choice.
 
1. fix for 1 year - potential saving of €281 over the year, assuming variable rate goes no further down - why choose variable with a possible saving for going 1 year fixed ? - unlikely that variable will dip to the 3.5% on offer for 1 year fixed ?


The question is, what does the fixed rate revert to after the year is up? Do you get to decide between one of the LTV rates or do they stick you on another, higher, rate?

The APR suggests that the fixed rates may not be quite as good as they may originally look.


Sent from my iPhone using Tapatalk
 
Yeah, had thought about that scenario myself but our understanding is that at the end of - say the 1 year low fixed rate - We would have the option of going variable or fixing again for a further period at whatever the prevailing rates were at that point ? Is this not the case ?

Edit : Charlie Weston writing in today's Irish Independent saying that AIB now has a 3 year fixed rate of 4.2% - worth considering in my case given their variable of 4.29% on LTV's 50-80% ?
 
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