Key Post I have an AIB tracker – should I consider fixing?

[Dippa3000]

Hi Brendan

I am debating whether to fix an AIB tracker, would appreciate some guidance.
Current rate as of 25/10/2022 is 2.2.% (could be 2.95% next week and analysts expect ECB to settle at 3% by Summer 2023, making my rate 3.95%)

1) Existing tracker margin
0.95%
2) Amount outstanding on your mortgage
€182500
3) Remaining term
13 years
4) Lender
AIB
5) Value of your home
€500000
6) Might you trade up or overpay your mortgage?
Possibly could overpay by a couple of hundred per month. Not trading up.
7) Do you face any barriers to switching? E.g. an impaired credit record, a mortgage with a warehoused portion due to a restructuring, reduced income since you took out your mortgage.
No
8) What rates are you considering fixing at?
The best rate I can find for possibly 10 years
9) Does your house have a high BER rating which might qualify it for a lower rate? Check it here or estimate it if necessary.
Not rated but likely C1 possible as recent renovations done.

 

[Brendan Burgess]

@Dippa3000

I think you should fix for 5 years, as that is where the best value is.



Here is how you will pay off your loan over the next 5 years if you do.

So you will be paying the lower 5 year rate on an average balance of about €140k

Even if rates are higher than 3.6% when the 5 years is up, you will be paying that rate on a lower balance - an average of about €60k.

So I don't see why you should pay 3.6% now on €140k when you could be paying a lot less.


You will (probably) lose your .95% tracker if you fix now. But with only 8 years left after a 5 year fixed rate, that is not that much a loss.

Brendan

 

[conorm69]

Hi Brendan,

Would really appreciate some advise on fixing our mortgage, whether that means switching or stay with AIB.
Should we be considering giving up our tracker? Fix for 5 years or for the remainder of our mortgage term?


1) Existing tracker margin .75%
2) Amount outstanding on your mortgage 136k
3) Remaining term 12yrs
4) Lender AIB
5) Value of your home 400k
6) Might you trade up or overpay your mortgage? No
7) Do you face any barriers to switching? E.g. an impaired credit record, a mortgage with a warehoused portion due to a restructuring, reduced income since you took out your mortgage.No
8) What rates are you considering fixing at?
9) Does your house have a high BER rating which might qualify it for a lower rate? No

Thanks Conor.

 

[Cushcam]

Hi Brendan, appreciate any feedback you could give on us switching from current tracker mortgage. AIB have given us an option of rate of 2.2% higher value 4 year fixed.
Should we try to hold on to tracker as our mortgage terms is lengthy still?

Thanks for your advice and time.

Existing tracker margin 1.25%
2) Amount outstanding on your mortgage
370k
3) Remaining term 21yrs
4) Lender AIB
5) Value of your home 600k
6) Might you trade up or overpay your mortgage? No
7) Do you face any barriers to switching? E.g. an impaired credit record, a mortgage with a warehoused portion due to a restructuring, reduced income since you took out your mortgage.No
8) What rates are you considering fixing at? 2.2% 4 years
9) Does your house have a high BER rating which might qualify it for a lower rate? Maybe but rate offer is somewhat comparable with green rate

 

[Brendan Burgess]

1) Existing tracker margin .75%
2) Amount outstanding on your mortgage 136k

@conorm69

This is a very close call.
A tracker margin of 0.75% has some value.
With an ECB rate of 2% , you will be paying 2.75%
This is still less than 5 year rate of 2.85% which is AIB's best value rate.
But the ECB rate is expected to increase again in which case you will be paying more than the 5 year fixed rate.
Having said that, with only 7 years left on your mortgage after a 5 year fixed rate, getting a lower rate for the next 5 years is the priority.
After 5 years, you mortgage will be down to €84k and falling rapidly after that, so a lower rate now is more important.
So definitely do not fix for 10 years.
Probably fix for 5 years, but it's very close.

 

[Brendan Burgess]

@Cushcam

AIB have given us an option of rate of 2.2% higher value 4 year fixed.

Existing tracker margin 1.25%

The ECB rate is now 2% , so you will be paying 3.25% shortly.
This is expected to rise in the short to medium term, so you could easily be paying 4.25%.
It will probably fall in the long term, but no one really knows. It is unlikely to fall to 0% again.

So you have a choice of 2.2% over 4 years vs. probably 4.25% over 4 years. I think I would go for the 2.2% and give up the tracker. A tracker of 1.25% is worth something but not that difference.

You will save 8% of your mortgage which you should use to pay down your mortgage.

I think you should do this anyway. However, you should also look at your mortgage contract to see if it's clear that you lose your tracker. Some AIB contracts said "At the end of a fixed rate period, you will be offered a tracker". But I doubt that the margin will be guaranteed.

Brendan

 

[Cushcam]

@Cushcam





The ECB rate is now 2% , so you will be paying 3.25% shortly.
This is expected to rise in the short to medium term, so you could easily be paying 4.25%.
It will probably fall in the long term, but no one really knows. It is unlikely to fall to 0% again.

So you have a choice of 2.2% over 4 years vs. probably 4.25% over 4 years. I think I would go for the 2.2% and give up the tracker. A tracker of 1.25% is worth something but not that difference.

You will save 8% of your mortgage which you should use to pay down your mortgage.

I think you should do this anyway. However, you should also look at your mortgage contract to see if it's clear that you lose your tracker. Some AIB contracts said "At the end of a fixed rate period, you will be offered a tracker". But I doubt that the margin will be guaranteed.

Brendan

Thanks Brendan, this is extremely helpful advice and appreciated.

 

[Rob McNamara]

Hi Brendan , be interested in this too, everyone is probably bit more cautious as many of us got stung when considering fixing last time, thankfully
resolved, we applied the Tracker Redress refund to the mortgage at the time

1) Existing tracker margin. ECB +1.1%
2) N/A
3) Amount outstanding on your mortgage E85000
4) Remaining term - 10yrs
5) Lender - AIB
6) Value of your home e350000
7) Might you trade up or overpay your mortgage? Not trading Up but have been overpaying by approx e500p/m
8) Do you face any barriers to switching? E.g., an impaired credit record, a mortgage with a warehoused portion due to a restructuring, reduced income since you took out your mortgage, you are now renting out the property. - NO
9) What rates are you considering fixing at? No Idea
10) Does your house have a high BER rating which might qualify it for a lower rate? Check it here or estimate it if necessary. Not applicable C2

 

[Brendan Burgess]

@Rob McNamara

1) Existing tracker margin. ECB +1.1%

3) Amount outstanding on your mortgage E85000
4) Remaining term - 10yrs

after the recent rate rise, you will be paying 3.1% . It's probably more likely to go higher than it is to come back down.

It's close. you can fix for 5 years at 2.85%. Don't worry about losing your tracker. after the fixed rate is up, you will have only 5 years left and a rapidly declining balance. So even if the rate is higher then, it won't be material.

It really is a toss up. If you force me to make a decision, I would say stay on the tracker, as you are overpaying it by €500 a month and you won't face any issues about early repayment fees which you would face with a fixed rate.

Brendan

 

[Rob McNamara]

thanks Brendan, was thinking along same lines, but wanted to see if you had same thoughts, compared to when we bought we're in a better financial position

 

[Kcorourke]

Reading these posts, we've more-or-less decided to stay with our AIB Tracker, but would appreciate your thoughts Brendan.

1) Existing tracker margin ECB +0.6%
2) Amount outstanding on mortgage
€95k
3) Remaining term
6 years
4) Lender
AIB
5) Value of your home
€550000
6) Might you trade up or overpay your mortgage?
Might overpay.
7) Do you face any barriers to switching?
No
8) What rates are you considering fixing at?
AIB Green 5 year fixed
9) Does your house have a high BER rating which might qualify it for a lower rate?
Yes B3

 

[Brendan Burgess]

1) Existing tracker margin ECB +0.6%
2) Amount outstanding on mortgage
€95k
3) Remaining term
6 years

You can fix for most of the remainder of your term at 2.65%

I think you should do so.

An ecb margin of .6% is great, but a fixed rate of 2.65% is great as well.

If you overpay, you may face some early repayment fee, but it should not be much.

This is an unusual case, in that you have a choice of two good options with relatively little uncertainty.

Brendan

 

[Kcorourke]

You can fix for most of the remainder of your term at 2.65%

I think you should do so.

An ecb margin of .6% is great, but a fixed rate of 2.65% is great as well.

If you overpay, you may face some early repayment fee, but it should not be much.

This is an unusual case, in that you have a choice of two good options with relatively little uncertainty.

Brendan

Thanks for the speedy reply. I guess we'll have to move quickly as those rates are bound to change shortly. (AIB require a new valuation report, which will take a week or more, so we may miss the boat on their current fixed-rate offering.)

 

[bre26cou]

Hi

Could you give some advice please.

) Existing tracker margin 0.75%
2) Amount outstanding on your mortgage €144,000
3) Remaining term 11 years 10 Months
4) Lender AIB
5) Value of your HOME €350k
6) Might you trade up or overpay your mortgage? No
7) Do you face any barriers to switching? E.g. an impaired credit record, a mortgage with a warehoused portion due to a restructuring, reduced income since you took out your mortgage. No
8) What rates are you considering fixing at? 2.85% 5 year fixed LTV < 50%
9) Does your house have a high BER rating which might qualify it for a lower rate? Not Sure

 

[Brendan Burgess]

8) What rates are you considering fixing at? 2.85% 5 year fixed LTV < 50%

) Existing tracker margin 0.75%

It's very close. You have a good margin at .75%.

With the ECB rate at 2%, you will be paying 2.75% vs 2.85%

The ECB rate will probably rise so you will be out of pocket for a while. But ECB rates could come down again, and you will regret having given up your tracker.

If an increase in the ECB rate to 4% , your mortgage rate 4.75%, would put you under strain, then fix.

However, if you can cope with such an increase, then I would tend towards staying on the tracker.

Brendan

 

[bre26cou]

It's very close. You have a good margin at .75%.

With the ECB rate at 2%, you will be paying 2.75% vs 2.85%

The ECB rate will probably rise so you will be out of pocket for a while. But ECB rates could come down again, and you will regret having given up your tracker.

If an increase in the ECB rate to 4% , your mortgage rate 4.75%, would put you under strain, then fix.

However, if you can cope with such an increase, then I would tend towards staying on the tracker.

Brendan

Thank you Brendan.

 

[darcon]

Hello Brendan, would hugely appreciate any advice on this scenario, currently on a tracker as follows:

On a tracker mortage with AIB: ECB + 0.95%

2) Amount outstanding on your mortgage
250k

3) Remaining term 14yrs

4) Lender AIB

5) Value of your home 630k

6) Might you trade up or overpay your mortgage? No

7) Do you face any barriers to switching? E.g. an impaired credit record, a mortgage with a warehoused portion due to a restructuring, reduced income since you took out your mortgage. Yes (spouse has long term health condition.)

8) What rates are you considering fixing at? AIB options include 10 year fixed @ 3.6% or 5 year fixed Green 2.6%

9) Does your house have a high BER rating which might qualify it for a lower rate? Yes, qualify for 5 year Green fixed 2.6%

 

[Brendan Burgess]

AIB options include 10 year fixed @ 3.6% or 5 year fixed Green 2.6%

3) Remaining term 14yrs

Fixing for 5 years seems better.

With a differential of 1%, you will pay approximately €11,000 less interest over the next 5 years than if you fix for 10 years.

You might or might not pay more interest for the following 5years. Rates might be above or below 3.6%.

And your balance after 5 years will be down to €170k.

So even if the rate then is >3.6%, you will be paying it on a smaller balance.

So 5 years seems clearly better than 10 years.
Your repayments will be about €120 a month lower than at 3.6%, so maybe use this to overpay the mortgage.

 

[Brendan Burgess]

On a tracker mortage with AIB: ECB + 0.95%

So the comparison is between ECB +0.95% (which is currently 2.95%) and 2.6%.

It's close enough, but overall ECB rates are more likely to rise in the medium term than fall, so I would go for the 2.6% and accept that you will lose your tracker.

Brendan

 

[darcon]

So the comparison is between ECB +0.95% (which is currently 2.95%) and 2.6%.

It's close enough, but overall ECB rates are more likely to rise in the medium term than fall, so I would go for the 2.6% and accept that you will lose your tracker.

Brendan

Brendan, thanks for reviewing this scenario, really appreciate it.