Fix now before ECB rate increase
- Thread starter bish123
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Brendan Burgess
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Very hard to know.
I presume that the bank's fixed rates are adjusted to anticipate rises in the variable rate - or maybe I am showing too much respect for the bank's rate setting.
The ECB rate is now 2.4%. It is expected to rise - say to 3%.
The AIB green rates do look attractive
3.3% for 5years. The ECB rate would need to fall a fair bit from their current levels for fixed rates to fall.
If you don't envisage yourself overpaying or moving, fixing for 5 years can't be too far wrong and could be quite far right.
I presume that the bank's fixed rates are adjusted to anticipate rises in the variable rate - or maybe I am showing too much respect for the bank's rate setting.
The ECB rate is now 2.4%. It is expected to rise - say to 3%.
The AIB green rates do look attractive
3.3% for 5years. The ECB rate would need to fall a fair bit from their current levels for fixed rates to fall.
If you don't envisage yourself overpaying or moving, fixing for 5 years can't be too far wrong and could be quite far right.
Predicting interest rates 3 years out is the functional equivalent of predicting the weather 3 years out. Nigh on impossible. If it were possible the Sundays Times rich list would be full of billionaire economists. The last I checked its not and so I can only assume then that BOI and AIB know about as much as any of us do about the course of interest rates over the medium to long term.
The more relevant question is do you value the certainty of a fixed monthly payment versus one that can move at any time? The fact your even asking the question suggests to me that deep down you value the certainty. Therefore, keeping it simple, you should aim to secure the best fixed rate deal in the market at the expiration of your current fixed rate.
It's only 3 months, not 3 years. The question isn't whether fixed is better than variable. Their fixed rate is up in Nov-26 so they will be re-fixing soon anyway.
The question is will the banks increase their fixed rates in the next three months following an expected ECB rate increase in Sep-26.
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If the rate increase is as expected as the article suggests (97% probability) then the current fixed rate pricing in the market is a reflection of that very much expected outcome.
Of course the more important metric for Irish bank mortgage pricing is the pillar banks funding costs and the flow to term dynamics in the market….ECB rates feed into that but as the last rate hiking cycle proved the flow to term in the Irish market (customers moving deposits seeking higher deposit interest rates) is effectively close to zero. Add to that the excess deposits held by AIB and BOI and you’ve a remarkably stable funding base which leads to mortgage pricing that is much more uncorrelated to the ECB rate than people think.
All a very expanded way of saying that with the timeline the OP outlined (Nov) Im not sure ECB rate moves in that period matter as much as one might think.
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