5 of 10 year fixed?

Discussion in 'The Switchers' Forum' started by bonzos, Mar 8, 2018.

  1. bonzos

    bonzos Frequent Poster

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    Hi folks,
    We currently have a mortgage with PTSB on a variable rate of 3.7%, we are considering switching to BOI fixed and have been offered 5 year@3% or 10 yaers@3.2%. BOI are advising me towards the 5 year option which I have been told I can pay a bit extra every month which will reduce the term over time. I m however very tempted by the security of the 10 year fixed as I can just forget about rate for a few years...any views on this?
     
  2. RedOnion

    RedOnion Frequent Poster

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    You can pay additional 10% of the normal repayment amount each month on either 5 year or 10 year rate (before BoI calculate if a break fee is due).
    Between those 2 rates, personally I'd go for 10 year. While still a high rate by European standards, it's 'better value' relative to interbank rates for the same time frames.
    If rates fall further over coming few years, don't be afraid to ask for a break fee and see if it's worth your while to refix.
     
  3. Sarenco

    Sarenco Frequent Poster

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    Looking at current swap rates, I think the 10-year fix @3.2% is the better deal.

    Unless you think you are going to be in a position to rapidly overpay your mortgage, the 10-year fix looks like the right call to me.
     
  4. gnf_ireland

    gnf_ireland Frequent Poster

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    I think this is key. If you can overpay by 10%, try do that as it will make a massive difference to you in the long term.
    If you want to really aggressively overpay the mortgage, say 50%+ mark, then you really need to consider being on the best variable rate
    If you want to moderately overpay - so between 10%-50%, I would shorten the fixed term, save the rest into a regular savers and pay down when the fixed term ends.

    I agree with the analysis above. While most expect interest rates to remain static for a year or two, they will start to rise and personally I would consider 0.2% good value for the extra 5 years security

    Understanding break fees is also important in the long run !
     
  5. skrooge

    skrooge Frequent Poster

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    As others have said it really depends on your circumstances and ability to over pay. If you can aggressively overpay a variable rate will probably work out cheaper in the long run by reducing your mortgage term. If you finances are more sensitive to interest rate changes then fixing would be a more prudent option.

    These are the extremes and most people fall in the middle. You could look to split the mortgage over both fixed rate options. Part 5 year, part 10 year. That way having the best of both worlds. This is especially useful if you expect your disposable income to get a boost in 5 years. Thought with this approach it is worth nothin BOIs variable rate are pretty bad. KBC offer similar products as BOI but with a much more competitive variable rate. Just to muddy the water don't forget the cash back offers (KBC flat rate 3K, AIB 2K BOI 2%+1%,).
     
  6. lledlledlled

    lledlledlled Frequent Poster

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    Why would you consider fixing for 10yrs at 3.2% when 2.99% is available at KBC?

    I would agree with the advice others have given regarding keeping a portion of the mortgage on a variable rate if you might be overpaying by more than 10%.
     
  7. Ndiddy

    Ndiddy Registered User

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    FYI, unless there is an extension of the offer, its probably too late to get the KBC cash back as the mortgage needs to be approved and drawn down by end of March to qualify.
     
  8. bonzos

    bonzos Frequent Poster

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  9. RedOnion

    RedOnion Frequent Poster

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    What's your LTV and balance?
    I had assumed you were already in process of switching to boi and deciding between their rates.
     
  10. bonzos

    bonzos Frequent Poster

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    LTV <50% and €150k remaining, I am in the process of organising all the paperwork which I will need regardless which bank I switch to. As I mentioned previously 2.6% is hard to ignore coming from 3.7% and I can still overpay by 10% per year
     
    RedOnion likes this.
  11. RedOnion

    RedOnion Frequent Poster

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    Absolutely, it's a great deal. It looks like UB are launching new rates next week so you might qualify for 2.8% over 5 years if they remove the balance criteria. You might have to have your current account with them though.
    Their overpayment treatment is very beneficial, and cashback will cover your legal fees.

    Likewise, don't overlook KBC 10 year rate.
     
  12. gnf_ireland

    gnf_ireland Frequent Poster

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    I wonder what other fixed products will banks bring out before the Autumn, which is traditionally the big house purchase season here? After that, there is a risk interest rates will start to move up a small bit, and I think once the ECB raise their interest rates, we are likely to have reached the bottom of the fixed rates.

    https://www.irishtimes.com/business...edges-closer-to-interest-rates-rise-1.3420049
    https://www.irishexaminer.com/breakingnews/business/ecbs-coeure-rates-to-stay-low-832211.html

    >>Germany’s benchmark 10-year bond yield dipped one basis point (bps) to 0.64%, heading back towards last week’s five-week lows. The Irish 10-year bond traded at 1.05%, down almost 2bps.
    If Ireland can only borrow for 10 years at 1.05%, the KBC offer of 2.95% is not too bad given the difficulty they would have with repossessing the house if someone defaulted. While I would prefer lower LTV's to have much lower rates, the harsh reality is our switching market is not dynamic enough to warrant special focus on it - although I 'hope' some bank would target 'blue chip' lending - so a combination of LTI and LTV at lower rates. But cannot see it happening in the short term.

    I am not sure how low the 10 year fixed rate will go? Can anyone see it going to 2.75% for example, and which bank is likely to make that move?
     
  13. gnf_ireland

    gnf_ireland Frequent Poster

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    Just two other things - for anyone who fixes

    1. clearly understand what product you are going to move onto when the fixed period expires and get it in writing. If we have learned anything from our tracker discussions, it should be that.

    The best case scenario here is you roll over onto the most applicable new business product - but be careful with Ulster here, as they have monetary restrictions on some of their products you may no longer qualify for. This is particularly important for switchers who are likely to be well into their mortgage schedule at this point.

    2. clearly understand your over-payment options without penalty and get it in writing
    This applies to both regular over-payments and once off over-payments
    In the case of regular over-payments, is this via flexible payment instruction only or can this be done via a bank transfer each month
    And are there any conditions/restrictions around changing these
     
    pauric and RedOnion like this.
  14. bonzos

    bonzos Frequent Poster

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    Thanks for all the replies folks I appreciate it. I think it will be a choice between the UB at 2.6% 4 year or the BOI 3.2% 10 year. UB pros are significant difference compared to my current rate, cons 4 years isn't a very long time in the life time of a mortgage and then I may have to start the process again. BOI is still 0.5% lower than my current rate but I do know for the next decade what I'm paying and forget about it.
     
  15. gnf_ireland

    gnf_ireland Frequent Poster

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    Can I ask what you have against KBC 10 year rate of 2.95%?
     
  16. bonzos

    bonzos Frequent Poster

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    1. I have my current account with a high street bank at the moment where I get free banking(due to age of account ). To avail of kbc 2.95% I would have to also switch my current account and get my wages paid into it otherwise the rate is 3.15%.
    2. I may be old fashion but I just prefer to use a high street branch of the bank I'm dealing with. I had bad experiences in the past with online banks and other service providers. Both BOI and UB have branches in the area I live. I'm a believe you get far better service when you can deal with Mr or Mrs X in a bank face to face....maybe it's just my communication style that works better in these situations;)
     
  17. guest2004

    guest2004 Registered User

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    I've a similar dilemma to the op. I bought last year and fixed for 1 year. Now I'm trying to decide between 5 years at 2.8% or 10 years at 3.2%. I paid a bit extra to fix for only 1 year last time around because the trend was still going down. It seems like its about to turn so I think the longer term looks like a better gamble now.

    Anyone have any advise/opinions a month on from the last post?
     
  18. RedOnion

    RedOnion Frequent Poster

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    Which banks are these with?
     
  19. MacktheKnife

    MacktheKnife Registered User

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    Last edited: Apr 12, 2018
    I remain unconvinced that there is a prospect of an interest rate rise by the ECB in the short term, the fact that some banks such as Ulster are offering sub 3% fixed rates would imply to me that they don't foresee interest rate rise in the short term either.
     
    Last edited: Apr 12, 2018
  20. Humpty Dumpty

    Humpty Dumpty Registered User

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    The last time banks went on a all out requirtment drive for customers , a rate reduction followed it