Fix or Not - opinions please

1stimebuyer

Registered User
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I have a mortgage with UB and am on their Loyalty Plus - Discounted Variable @3.1%

Loyalty PlusDiscounted Variable
Up to 80% 3.10%
(4.30% SVR* - 1.20%)

For the past month or so UB have been offering the same rate on a fixed term of 5 years.

Loyalty PlusFixed Rate - Up to 80% LTV 3.10% 4.30% SVR*

From reading this forum and other forecasters it seems that mortgage rates might increase in the next year.

I suppose my main question is relative to the SVR. It seems that SVR is mainly for people rolling off Fixed rates and there are usually better deals on fixing or better 'promotional' variable rates.

If UB started to increase their rates would SVR be hit? It seems that their discount rates, variable rates and fixed rates may change but as the SVR is so far above current fixed and variable rates (and massively over the european average). Does the SVR raise if interest rates raise?
 
I'm afraid you are asking us to predict the future, which isn't really possible.

Personally, I wouldn't fix from that variable rate. Hopefully increasing competition in the mortgage market will nudge down mortgage rates in the coming years.

However, if you place a premium on certainty then I think there is value in fixing at that rate for 5 years.

You pays your money and you takes your chances...:)
 
I recently fixed with BoI for 3 years in order to get a rate as good as the discounted variable your currently on at 3.1%.
You can get the same rate for 5 years fixed- personally I would take it. I don't think they can go any lower without competition here (ECB rates are already on the floor) and I can't see many banks wanting to get a piece of the dysfunctional Irish mortgage market.
US rates have started to increase. BoE have started to make noises about the same move.

But it's your call
 
Certainly isn't top of the pile as we can afford some increases. I'm more concerned about the frustration factor of having missed the boat with a good fixed rate offer with my variable increasing.

I was airing on the side of staying with what we have but will take the advice into account and request a rate sheet anyway.

When rates increase does the SVR increase immediately or do the fixed and promotional rates go first?
 
....When rates increase does the SVR increase immediately or do the fixed and promotional rates go first?

In theory, all rates should go the same way in a relatively short space of time, but at this stage you cannot rely on the Banks to do anything you'd expect.

Personally, this is what I would consider:

Can you afford the repayments if interest rates went up 1% or 2% from your current rate (there are lots of annuity calculators on the internet, if you want to run the numbers and see what it would mean based on your current mortgage) ?

What does your crystal ball tell you that European interest rates are going to do, over the next few years (if you think they will increase and if so, by how much and to what timeline ?) ?

What do you think the future holds for Ulster Bank and your relationship with the Bank ? Do you think there's a chance that Ulster Bank may want to keep their rates low, to try and grow their loan book, or do you think there is a chance that they may become satisfied with their market share, so have no incentive to keep their rates particularly competitive and by extension, hike up their SVR ? What influence, if any, do you think their parent company RBS might have on their strategy or lending rates ? .. RBS has been going through the wars for a hell of a long time now, could always benefit from increased profitability and dividend income from it's subsidiaries, might like to sell Ulster Bank in the future (although they claim they are keeping it) etc.

Personally, I don't see European interest rates increasing anytime soon and certainly not by a substantial amount - whatever about the possibility of a 0.25% interest rate hike over the next 12 months. My thinking would be along similar lines to that of Sarenco's (above).... and I would be hoping that competition might increase, with the possibility of the Credit Unions, An Post, Frank Money or whoever entering the market to help bring in more competition - not to mention a more aggressive AIB looking to grow it's loan book with the government wanting to sell it's shares etc.
 
In much same boat, 5 year rate of 2.99 on offer from UB. Rate sheet is filled in but have held off posting.

Apart from competition is there any thoughts that banks will increasingly try to get more and more of their book onto fixed before ECB rates go up by continuing to reduce and thus reducing problems with arrears when they have to increase svr? I just have it in my head that might get a better fixed offer as rate rises become more likely just to try push people that direction. similar to BoI approach I guess. Anyone see logic in this thought process?
 
Do you really think bankers can predict future interest rate movements with any degree of accuracy?

There is actually pretty clear evidence that default rates are lower on fixed rate loans. Stands to reason if you think about it.

So a bank may well be trying to protect its own interests. Doesn't necessarily make it a bad deal for the borrower.

Again, to be clear, I'm not recommending that you should fix - I wouldn't for what it's worth.
 
Thanks for the comprehensive replies.

Part of my issue is I am on a favorable rate even at a variable rate. It will 'track' the SVR as per the conditions of the offer.
If I take a fixed rate for 5 years (at the same rate) I am not hugely confident I will be able to get an offer like I have at the end of the fixed period and I will have to choose some offer.

I could move banks at that point but that would attract a cost that I don't think I would save over 5 years on the fixed rate.

Soo many other variables. I'll stay with what I have an keep a close eye on things.
 
There is actually pretty clear evidence that default rates are lower on fixed rate loans. Stands to reason if you think about it.

Can you give an example of that evidence.

Why do you think it stands to reason. I have always thought that in a neutral scenario, (whatever that might be), a fixed rate loan would be more expensive. It is a more valuable product for the borrower as it gives certainty. It is a more expensive product for the lender, as they are exposed to greater rate risk.
 
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