This is not the case for the interest rates we've seen in the last half-decade. At 2.5% over 25 years you are paying off 55% principal and 45% interest from day 1. At ten years in you are paying 70% principal and 30% interest.n the early years of paying a mortgage, your monthly repayment consists mostly of interest and you're paying off very little of the original capital.
So million dollar question is what is the magic term people will be fixing for now? 5, 7, 10, 20 years.... what's being priced in or not.....crystal ball time for many..will a 3 year fixed cover increase rates and they drop again after, will someone need to go out to 10 years to bypass the rate increases...(increases compared to now that is!!)I think a tread giving real monetary figures on what increased interest rates will do to mortgages is warranted as so many people are used to 0% ECB rates and increases will be a big shock.
It is very likely that the ECB will raise rates by 2% in the next 9-12 months.
Recent mortgage pricing would suggest that a 3 year fixed rate will be about 4.75% at that point up from about 2.75% today.
That's a whopping 70% increase.
In money terms a €350,000 mortgage over 30 years would go up by €400 a month.
If the ECB was more aggressive and move to 3%, rates would average 5.75% (over 100% increase) and todays €1428 mortgage payment would increase to €2042 - a €600+ increase per month!
If you are buying a house at present or recently bought or are in a short term fixed rate, you may want to sit down and think hard about a long term fix as an extra €400-€600+ a month on top of general inflation cold be very painful
My personal opinion is that if you can get a long term fixed for under 3.5%, fix for as long as possible. (Under 3% and its as good as you will ever get) Highly unlikely ECB will ever return to zero and their stated mid term aim is to be averaging 2% - and that's means approx. 4.5%-5% mortgage rates. Even at 1.5% ecb, that will be 4% rates.So million dollar question is what is the magic term people will be fixing for now? 5, 7, 10, 20 years.... what's being priced in or not.....crystal ball time for many..will a 3 year fixed cover increase rates and they drop again after, will someone need to go out to 10 years to bypass the rate increases...
Going through this dilemma myself at the moment...
Also worse for anyone on interest only for a long time, while I've no idea of the breakdown you might have a 2008 mortgage that only started being repaid in 2018.This is not the case for the interest rates we've seen in the last half-decade. At 2.5% over 25 years you are paying off 55% principal and 45% interest from day 1. At ten years in you are paying 70% principal and 30% interest.
Over 25 years you would need to be on a rate of 2.8% or more to be paying more in interest than principal at the start.
This is not the case for the interest rates we've seen in the last half-decade. At 2.5% over 25 years you are paying off 55% principal and 45% interest from day 1. At ten years in you are paying 70% principal and 30% interest.
Over 25 years you would need to be on a rate of 2.8% or more to be paying more in interest than principal at the start.
We could be there in about a year or soMy talk of the interest making up the majority of the monthly repayment dates back to when interest rates were far higher and didn't take account of current low rates.
We could be there in about a year or so
Maybe they just reflect current cost of borrowing.I think the fixed rates available at the moment kind of predict the maximum expected interest rate rises.
And remember the indemnity bond you had to take out for loans over 80% ltv
Could you imagine had they were around in the run up to 2008, claims wouldn't have been met. I tried years ago to get information on these, how many, value etc, no data....had to be a scam.
Seems now with Avant pushing their rates up as per Brendan's thread that their borrowing costs have gone up, with their 10 year jumping 1% which is a significant hike..assume impact of ECB 0.5% hike and others to follow? How much more to follow? As BOI stated that the July ECB increase wouldn't be passed on...So many people are just so used to low rates that they are going to get a shock - if ECB goes to 2.5% in the next 12 months, it will be a huge jump in their payments and they need to be looking now at fixing - not in 6 months time when fixed rates will be materially higher.
I finally convinced a colleague today of the benefits. His argument was that he'd be paying an extra €82 immediately and didn't like that. His current fixed rate is due to ends in November.
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