Coming off Fixed Rate Mortgage in December

R

RNCFAN

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.... Thankfully! I've been on a +4% rate for quite some time.

(Crystal Ball time) Do you think Interest rates on mortgages are likely to go up in the next year and so I am better off going for a fixed rate? Or do you think they will stay steady and so I am better off going for a variable?

I know this is a bit of a 'finger in the wind' question but your thoughts would be appreciated.

Cheers.
 
My view is that interest rates will stay low until mid 2010 and then will start rising steadily into 2011 as the european economy picks up. Who knows what rate they will end at, 4% ?

There are loads of threads already about whether someone should go for a fixed or variable\tracker mortgage. Do a search and you will find them.

My view is go for a variable over a fixed unless you feel you need to know exactly what your repayments will be from a budgeting perspective. The banks never loose money on fixed interest rate mortgages.

If you have an option for a tracker mortgage then bite their hands off.
 
I note the person above was Banned - maybe I won't take their opinion too much into account.:confused:

Was just wondering if anyone else has an opinion on this? I do not have the option of a Tracker with my bank unfortunately. The variable I am being offered is 2.25% Vs the fixed for 2 Years of 2.8% - the difference in monthly payments being less that 70euro.

Is the 2.8% fixed for two years a good rate considering the likelyhood of the rates going back up? Surely they can not go any lower?

Thanks.
 
Like everything there are pros and cons. Each set of circumstances is different and therefore should be assessed differently.

If you were to analyse the best variable/tracker rates available over the last twenty years you will find that in most instances the variable rate in the long term works out cheaper than the fixed rate.

If you are doing it to make or save money then the probability is that you will not. The fixed rates are based on what market forces believe interest rates will be in the long term with a premium built in, so you are betting against the market, you may triumph once but what are the chances of that?

If you are looking to fix then it should be for security reasons with a view to protecting against fluctuations in your monthly expenditure. That said fixed rate terms are inflexible and you will pay if you try to break a fixed term.

One final point, there is no accounting for unforeseen circumstances such as the lender taking a notion that they are going to increase rates despite rates remaining low at ECB and Euribor levels. If the rate variable rate remains the same for the next twelve months then it will need to increase by 1.1% for the remaining 12 months of the fixed rate for it to be close to a breakeven situation.
 
we came off fixed last Dec and have been on a tracker since. It is looking likely that the ECB may start to increase interest rates mid 2010, especially if inflation starts to rise, but we will stay with the tracker as it is the fairest probably. If I was in your situation, I would go and fix for the two years. There would be the certainty of the monthly repayment amount. If rates start to increase in 2010, even quite slowly, the banks will up their rates no problem. On the other hand, if interest rates remain low, you will be overpaying on the fixed, but fixed at least gives you peace of mind. Certainly for the first 2 years of our mortgage at least we knew what the monthly repayments were going to be.
 
If you can handle some interest rate increases then stick with the variable, if you need to be certain of future monthly mortgage repayments then you should look at fixing.

Do not fix to try and time the market, only fix if future rate increases will overstretch you.


www.moneybackmortgages.ie
 
Colndas said:
If the rate variable rate remains the same for the next twelve months then it will need to increase by 1.1% for the remaining 12 months of the fixed rate for it to be close to a breakeven situation.
Click to expand...

I'm not following you there sorry - can you explain further?

Thanks again.
 
The difference between the variable rate and fixed rate on offer is 0.55%. If all stay the same and you opt for the variable then you will have gained 0.55% for the first twelve months.

For you to lose out, the variable rate for the following twelve months will need to be 1.1% higher. 0.55% to cancel the gain made in the first twelve months and 0.55% to cover the difference between the variable and fixed rates on offer.

Hope this makes sense.
 
Last edited:
Colndas said:
The difference between the variable rate and fixed rate on offer is 0.55%. If all stay the same and you opt for the variable then you will have gained 0.55% for the first twelve months.

For you to lose out, the variable rate for the following twelve months will need to be 1.1% higher. 0.55% to cancel the gain made in the first twelve months and 0.55% to cover the difference between the variable and fixed rates on offer.

Hope this makes sense.
Click to expand...

Understand now - Thanks.
 
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