To Fix or not to Fix that is question

I see in Papers today, the powers that be are advicing people with variable and tracker mortgage to avail of the deals for Fixing Mortgages as the current crisis has hit rock bottom and the European economies will start to show growth leading to an increase in interest rates..is it time to fix or is it still worth hanging onto Tracker for now??

What's the margin on your tracker?

Not Self specific - just up for debate with the wider user of forum

Fixed rates always favour the banks unless unforeseen circumstances cause a spike in interest rates. They predict ahead and ensure there is a margin for them in the rate. Unless you are very averse to rates that climb steadily/slowly you should stay on a tracker or a variable.

I would only suggest fixed rate mortgages if you feel that it is important for you to know what your outgoing are.

I am a firm believe that the banks always win. Backing up Slim's post, the banks will have factored in any expected increases in interest plus a bit more!

If you are in a tracker mortgage I would stay put - it is my biggest regret that we fixed...you never know what is around the corner..

ccbkd said:

I see in Papers today, the powers that be are advicing people with variable and tracker mortgage to avail of the deals for Fixing Mortgages

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Those "powers that be" quoted in the Independent are mortgage brokers - who of course may gain financially if people switch mortgages through them. (Just trying to get some more business ?)
Fixed rates are starting to rise - so if you want to fix now is probably a good time. Whether to fix or not is a bigger decision.
People could try and do a 50% on a fixed rate and 50% on variable if your lender lets you.

Just on the 50/50 option- as far as I remember last time I checked this with AIB, we would actually lose our v favourable tracker on the non-fixed half if we decided to go with it.
IMO Only fix if you need to know your outgoings over a set period and can afford to pay for the luxury of this, which if you have a great tracker could be 200+ a month with the current longer fixed rates (which I don't actually think are all that good TBH). Even if you choose a shorter 2/3yr fixed you may be giving up a great tracker for a short period of stability and will come off it then onto what?
Best of luck....

Suffer the slings and arrows of outrageous fortune and remain on a variable rate would be my advice.

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If someone was getting a new mortgage (if we get one)!!! Should we go with brand new variable or new fixed?

Only fix if you need to be sure of your future repayments, otherwise go variable. Don't try and time the market.

Babsi said:

If someone was getting a new mortgage (if we get one)!!! Should we go with brand new variable or new fixed?

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i would go with a new discounted fixed interest rate from the lender ,for example BOI have a 2 year new introductory fixed rate i think at present , 2.65% i think.

So what your saying is I have to decide myself!!!! Agggghhhhh!!! Thanks - this is what we were quoted with one bank:
Variable 2.70% €998 gross
2 yr fixed 2.75% €1,006 gross

Babsi said:

If someone was getting a new mortgage (if we get one)!!! Should we go with brand new variable or new fixed?

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I intend to get a new mortgage in the near(ish) future. I would be looking at a split (50/50 probably) AIB mortgage, half variable and half fixed for 10 years @ 4.41% currently.

michaelm said:

I intend to get a new mortgage in the near(ish) future. I would be looking at a split (50/50 probably) AIB mortgage, half variable and half fixed for 10 years @ 4.41% currently.

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AIB's ten year fixed rate gone up to 4.65% with effect from today.

On the general point, I'd agree with everything Norfbank has said above.

I'd also re-iterate that if you have a low margin tracker (say <1.5% above ECB) and a good few years left on your mortgage I'd be VERY reluctant to give up your tracker to fix now, as it's extremely unlikely that you'll get such a tracker again. So you get a fixed rate for a few years, but then are forced to accept whatever rates your lender throws at you for the rest of your mortgage.

Another option for anyone who is considering fixing is to save up the difference between their current variable rate and the fixed rate repayments. If the variable rates increase, use the savings to help you pay.

what are the latest forecasts for ECB rate...bloxhams forecast 1% to march 2010, I think the ESRI forecast 1% for the whole of 2010...would be interested to hear other forecasts

as LDFerguon pointed out, you'd be giving up the tracker for life and only getting the fix for 5 years, after the 5 years you'll be getting a high variable rate as banks are no longer going to offer lower margins

it's very possible that a 5 yr fix could be better than a tracker (depends on the tracker rate) but over the life of a mortgage US studies have shown that variable rate mortgages are cheaper

I have a good tracker and I'm holding onto it, rate rises or not.

NorfBank said:

Only fix if you need to be sure of your future repayments, otherwise go variable. Don't try and time the market.

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This is good advice but it is also true that we are at a historical low, the lowest point I have ever experienced and it really can't go any lower so I'd fix. This is based on someone who remembers rates at 15%+ etc. People should bear in mind that a rate jumping from say 3 to 6 percent is a doubling whereas say a 10 to 13 is not even though it's an actual 3% increase in both cases, this is particularly important for people who have only recently begun their mortgage and most of the payments are interest.

There is a particular argument in relation to (the lower) tracker mortgages and most financial people on AAM advise on not letting this rate go. I'm not so sure.

LD - On the point of people saving the difference between what they are paying on the variable versus the fixed, most people do not have the discipline to do this. With deposit interest so low and especially for people in negative equity it would be better to be putting all spare case to pay down the mortgage.

I guess the best advise to everyone is that you need to recognise your own personal circumstances and what you can afford and then decide what to do. None of us has a crystal ball.

My husband and I sat down to go through the household budget last night and discuss fixing. We've decided to fix for 4 years at 3.57% (currently on AIB standard variable of 2.25%).

We thought about all the arguments set out on this thread, and considered saving the difference instead, but ultimately decided that 3.57% is a rock bottom rate. We would have taken your hand off for it at the beginning of last year. I think rates will start to come up by the beginning of 2010. We have a very big mortgage, and my husband has had a 10% salary cut. If rates go above 4.2% we are in trouble. We decided to take the pain now for some security down the line. Our broker agrees and doesn't make a cent from our decision by the way, as we are staying with the same bank!

I think it really depends on your personal financial circumstances.

LDFerguson said:

I'd also re-iterate that if you have a low margin tracker (say <1.5% above ECB) and a good few years left on your mortgage I'd be VERY reluctant to give up your tracker to fix now, as it's extremely unlikely that you'll get such a tracker again.

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I'd agree with this. I've a very low margin tracker and wouldn't dream of fixing but I'll be moving house in the near(ish) future so will face the fix or not quandary.