Avant One Mortgage - thoughts

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wrongnumber

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Hi all

Looking for some advice on if I should take on Avant One Mortgage for 30 years.

It goes against traditional advice as circumstances change over 30 years and ECB rates are expected to decrease over the next two years.

However, given the odd nature of the Irish Mortage market at the minute, I think it looks attractive. Some thoughts that I am seeking opinions on.

  1. The One Mortage is offered at 4% for 30 Years. The current ECB refinance rate is 4.5%. Even if ECB reduce rates by 1% over next two years, it is highly likely Irish Lenders will remain at 4%+.
  2. Traditionally, Irish lenders offer rates at ECB + 1.5% to +2%. e.g. rates offered of 2% when ECB was 0%. They have been slow to increase rates with ECB, financing it from low deposit interest paid,. So, it stands to reason that even if the ECB reduce rates over next year, Irish lenders could still actually increase rates, especially if they come under pressure to increase their deposit rates.
  3. The One Mortgage offers signficant flexibility:
    • 10% of principle can be paid annually, thus reducing term or monthly payment.
    • Early redemption fee is capped at 2% of principle for first 10 years, dropping to 1.5% thereafter.
    • If you need to move, they waive this fee if you remortgage with them.

So, if one borrowed €500k, the monthly payment would be €2,387 per month, fixed for the 30 years, nothwithstanding the flexibility of paying up to 10% principle per annum.

  • If mortgage rates dropped by signficantly - say 1%- you could seek to refinance and pay the break fee. The breakage fee of c. €10k would be a small price to pay to save on the c. €100k interest over the term and reduced c. €300 p/m payment. Subject to credit approval of course.
  • If mortage rates increased by 1%, the monthly payment would stay as is, saving c. €300 per month and c. €100k interest over the term.
I see relatively low downside risk in return for peace of mind... keen to get thoughts on above as expect I am missing something or being naive!

Thanks.
 
The intent would be to buy a "forever home". Nobody has a crystal ball however and our circumstances could change.
 
wrongnumber said:
The intent would be to buy a "forever home". Nobody has a crystal ball however and our circumstances could change.
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If you understand that you can't port the mortgage if you move, then I think it's a good idea.

I have no idea why there is such a received wisdom against long fixed rates. People say that a fixed rate is gambling on future interest rate changes being in your favour. I think it's the opposite. It's not gambling. You know what you're paying forever.
 
wrongnumber said:
Hi all

Looking for some advice on if I should take on Avant One Mortgage for 30 years.

It goes against traditional advice as circumstances change over 30 years and ECB rates are expected to decrease over the next two years.

However, given the odd nature of the Irish Mortage market at the minute, I think it looks attractive. Some thoughts that I am seeking opinions on.

  1. The One Mortage is offered at 4% for 30 Years. The current ECB refinance rate is 4.5%. Even if ECB reduce rates by 1% over next two years, it is highly likely Irish Lenders will remain at 4%+.
  2. Traditionally, Irish lenders offer rates at ECB + 1.5% to +2%. e.g. rates offered of 2% when ECB was 0%. They have been slow to increase rates with ECB, financing it from low deposit interest paid,. So, it stands to reason that even if the ECB reduce rates over next year, Irish lenders could still actually increase rates, especially if they come under pressure to increase their deposit rates.
  3. The One Mortgage offers signficant flexibility:
    • 10% of principle can be paid annually, thus reducing term or monthly payment.
    • Early redemption fee is capped at 2% of principle for first 10 years, dropping to 1.5% thereafter.
    • If you need to move, they waive this fee if you remortgage with them.

So, if one borrowed €500k, the monthly payment would be €2,387 per month, fixed for the 30 years, nothwithstanding the flexibility of paying up to 10% principle per annum.

  • If mortgage rates dropped by signficantly - say 1%- you could seek to refinance and pay the break fee. The breakage fee of c. €10k would be a small price to pay to save on the c. €100k interest over the term and reduced c. €300 p/m payment. Subject to credit approval of course.
  • If mortage rates increased by 1%, the monthly payment would stay as is, saving c. €300 per month and c. €100k interest over the term.
I see relatively low downside risk in return for peace of mind... keen to get thoughts on above as expect I am missing something or being naive!

Thanks.
Click to expand...
If you need to move, will Avant allow you keep the fixed rate?
 
FCBC12 said:
If you need to move, will Avant allow you keep the fixed rate?
Click to expand...
My understanding is that they waive redemption fee (or perhaps just a portion of this) but you'd be looking at current rates for new mortgage.

Would love to be incorrect on this, so if anyone knows differently please flag. Would be a bit of a game changer really.
 
dubdub123 said:
My understanding is that they waive redemption fee (or perhaps just a portion of this) but you'd be looking at current rates for new mortgage.

Would love to be incorrect on this, so if anyone knows differently please flag. Would be a bit of a game changer really.
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You are correct.
 
Thanks all.

Any thoughts on my logic regarding 4% being an unusually "good" rate given the ECB rate is 4.5%?
 
wrongnumber said:
Thanks all.

Any thoughts on my logic regarding 4% being an unusually "good" rate given the ECB rate is 4.5%?
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Just bringing this up as interested to see if I am completely wrong here. I know nobody has a crystal ball but we can look at current rates and evaluate if they are "good" or not.

Came across this Money Sherpa article - I think Mark posts here? moneysherpa.ie/mortgage-interest-rates/

Seems to align with my view that 4% is an unusually good rate!
 
My view is that people get very hung up over long-term fixed rates. Sometimes it is presented as a 'gamble' that you will lose, if interest rates drop and you are paying over the odds. I think it's the opposite - it's not gambling. 4% seems pretty good by historic standards. Also you know exactly how much you will be paying every month until the end of the mortgage term. And inflation will reduce the real value of the monthly payments which are fixed, while your income should increase. Avant also allows an overpayment.

The only fly in ointment that I can see is that you can't port the mortgage if you move house, but if you are reasonably sure you're going to stay in your house for the term, then it's less of a critical factor in my view.
 
time to plan said:
My view is that people get very hung up over long-term fixed rates. Sometimes it is presented as a 'gamble' that you will lose, if interest rates drop and you are paying over the odds. I think it's the opposite - it's not gambling. 4% seems pretty good by historic standards. Also you know exactly how much you will be paying every month until the end of the mortgage term. And inflation will reduce the real value of the monthly payments which are fixed, while your income should increase. Avant also allows an overpayment.

The only fly in ointment that I can see is that you can't port the mortgage if you move house, but if you are reasonably sure you're going to stay in your house for the term, then it's less of a critical factor in my view.
Click to expand...

Many thanks for this and agreed on all your points.

I also agree that 4% is low by historical standards.

What I am also interested in is if people agree that 4% rates appear low relative to current ECB rates. Something not adding up to me. ECB rates are 4.5% so mortgage rates of <5% seem like an anomaly. Even if the ECB cuts rates in 2024, I do not see Irish Mortgage rates coming down as they are already far below where they "should" be.
 
wrongnumber said:
Many thanks for this and agreed on all your points.

I also agree that 4% is low by historical standards.

What I am also interested in is if people agree that 4% rates appear low relative to current ECB rates. Something not adding up to me. ECB rates are 4.5% so mortgage rates of <5% seem like an anomaly. Even if the ECB cuts rates in 2024, I do not see Irish Mortgage rates coming down as they are already far below where they "should" be.
Click to expand...
The answer is likely that Avant's source of funding is cheaper than the ECB rate.
 
I had the opportunity to take out One Mortgage over 19 years for my mortgage. Instead i opted for 2.1% fixed over 10 years.
Part of the reason was to drive me to overpay and not have the mortgage run into post retirement age.
I haven't overpaid yet as only 2 years in but as soon as i clear another loan i plan to throw even a few thousand each year against the mortgage.
 
wrongnumber said:
Many thanks for this and agreed on all your points.

I also agree that 4% is low by historical standards.

What I am also interested in is if people agree that 4% rates appear low relative to current ECB rates. Something not adding up to me. ECB rates are 4.5% so mortgage rates of <5% seem like an anomaly. Even if the ECB cuts rates in 2024, I do not see Irish Mortgage rates coming down as they are already far below where they "should" be.
Click to expand...
I guess it depends what Avant's long term funding costs are.
 
dubdub123 said:
I had the opportunity to take out One Mortgage over 19 years for my mortgage. Instead i opted for 2.1% fixed over 10 years.
Part of the reason was to drive me to overpay and not have the mortgage run into post retirement age.
I haven't overpaid yet as only 2 years in but as soon as i clear another loan i plan to throw even a few thousand each year against the mortgage.
Click to expand...
For now you may be better putting the money on deposit and getting 4% before DIRT.
 
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