"Should I fix my Ulster Bank SVR mortgage"

[Brendan Burgess]

I was asked this today.

Mortgage €170k
House value: probably €120k

New variable rate: 4.95%

Options available:
Fixed for two years: 5.4% ( + 0.45%)
Fixed for three years: 5.7% (+ 0.75%)

Summary of my advice:
Fix €120k until 2014. Leave €50k on variable (if Ulster Bank allow it)

Arguments against fixing

• The banks have a better idea of future rates than you do
• They build in a margin for fixing, so they are not usually good value
• If you want to move, you will have to pay a penalty for repaying your mortgage early.
• If you have savings you won't be able to use them to reduce your mortgage
• If the market returns to normal competition, you won't be able to switch to a better deal.

Arguments in favour of fixing in this case

• You get a guaranteed rate for three years which is not a lot higher than the standard variable rate.
• As ECB rates are 1.25%, they are far more likely to rise than fall
• You are unlikely to be moving in the next three years
• Because you are in negative equity, you won't be able to switch to another lender if there is a better deal.

Leave part of it on variable if it's allowed
so that you can use your savings or any lump-sum you might get to reduce your mortgage.

 

[callybags]

Also, will Ulster Bank facilitate splitting the mortgage in two?

Your first point against fixing ( The banks have a better idea of future rates and build in a margin for fixing, so they are not usually good value )
I think is the most important.

In my experience and that of poeple I know, I have yet to see anyone save money by fixing for any period.

Obviously some do, and there is also the security of having a standard payment each month to take into account.

The personal circumstances of the mortgage holder should be the most important factor in deciding.

 

[marksa]

Also, will Ulster Bank facilitate splitting the mortgage in two?

I have yet to see anyone save money by fixing for any period.

Obviously some do, and there is also the security of having a standard payment each month to take into account.

certainty comes at a small price in this instance, and yes - you can save money on fixing - I did on 3 year from 2006 to 2009, however lost out on a fix from 2001-2004. Swings and round-abouts, however, I did not have to worry when rates were rising for the first year in 2001, nor throughout the 2006 to late 2008 when rates got far above my fixed one.