Advice please, fixed or svr?

Advicepls

Registered User
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Hi there

I am coming to an end of a fixed rate of 3.7% with ulster bank. The best options open to me are SVR @3% or 4 year fixed at 2.6%. It is highly likely that we will move in 18 months to 2 years so I don't think the fixed option is viable as there may be a large breakage fee. However, having always been on a fixed rate I feel less comfortable with the SVR. Would welcome any advice please - are rates likely to shoot up in the next year which may make the svr a bad idea?
 
I'd be jumping at the 4 year fixed rate if I had the option!

Have a read through the thread about the UB rate here which might answer your questions: https://www.askaboutmoney.com/threa...nch-4-year-fixed-mortgage-rate-of-2-6.204325/

In terms of variable rates, the market has priced in an expected ECB rate rise in about 2 years. So while in the short term there might be competitive pressure on the banks to reduce rates (their margin), in the medium term there might be some upward movement on rates.
The good news if if you are on a fixed rate, and market rates rise, then you'll have little or no break fee to repay it in 2 years.
 
Thanks Redonion. What if the market rate drops - and I want to sell 2 years into my 4 year fixed term....whats the worst case scenario that I might have to cough up? This is all a bit double dutch to me but I do know that 2.6% saves me a good chunk of money every month!
 
Probably easiest to under with examples.

I'm assuming if you qualify for 2.6% rate you've a fairly substantial balance?

Scenario
1: rates stay exactly the same.
4 year rate is +0.222%. 2 year rate is -0.126
If you break in 2 years, fee will be balance * 0.347% * 2
The fee here will be marginally less than you'll have saved between 3% and 2.6%

Scenario 2: rates fall further. Say 2 year rate drops to minus 1.
Balance * 1.22% * 2
The break fee here will be more than you'll have saved between 3% and 2.6% (3 times in this scenario).

Scenario 3: rates rise. If the 2 year rate rises above 0.22%, there will be no break fee.
 
Thanks again for your help. I think we will go with the 3% svr on account of selling in the next few years, it just sits easier with me. Having never been on a SVR do you think that is an ok option for say the next two years? Also, with the SVR can we choose to fix then at any time? We owe 326k so not a massive balance. Property worth in the region of 550k.
 
Also, with the SVR can we choose to fix then at any time?
Yes, you'll just move to the fixed rates available at that time.

Personally, I think there is a little more room for SVR to reduce before market rates start to rise. I don't have a crystal ball, but the money markets are pricing in a rate rise in 2 - 3 years, so we might see fixed rates rising in the next year to 18 months, but that can all change.

If there's nothing preventing you from switching to another bank, that might be worth looking into. For example switch to BoI at 3% fixed for 2 years, and get their cash back for switching. Have a look at the best buys in switching forum to see best rate available to you, adjusted for cashback.
 
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