Fixed rate mortgage for how many years? 2/3/5/10?

S

SKmann

Registered User
Messages
5
Hi All,
Planning to sign the contract within next 3-4 weeks for our new house. Considering Brexit, potential down turn and other factors what is the best option within fixed rate mortgage? KBC are offering two year fixed at 2.3% for current account holder, 3year @2.65%, 5 year @ 2.8% and 10 year @3.2%. Appreciate any inputs, suggestions.
Thank you in advance
SK
 
I think its hard for others to advise you here. How sensitive are you towards interest rate changes? What ages are your children (if any) and how have you any major expenses in the relative future? Have you any plans to overpay your mortgage and if so by how much?

With Brexit and the general economy its likely interest rates will not rise materially in the next 2 years or so. This is why the 2 year fixed rate is so low. The further you go beyond this timeframe the more uncertain it is.

I am personally a great believer in longer term fixed rates (in absence of any sort of tracker system in place), as it does offer certainty and stability. I would love to see lifetime fixed rates in Ireland at competitive rates. If there was some sort of variable product baselined against anything other than the "whim of a bank" I would go with that.

In my case, I fixed for 10 years with KBC a while back - but there were many personal reasons for doing this.
 
It's horces for courses. Personally, I wouldn't fix for more than 4 years (to minimise/avoid any break fee should I need/want to move or reorganise my finances). Earlier in the year I was tossing up between 2 years @ 2.3% and 4 years @ 2.6% and I went for the latter in the end.
 
Thank you all for the reply, I suppose my main intention is not to expose to a much volatile situation. Currently I'm getting 2 year fixed at 2.3%, which is lowest in the market. I'm thinking of going for 2 year fixed for now and fix it for longer term after that. I hope in 2 years time Brexit effect and other financial down turn situation should be much more clear. what you guys think? appreciate your inputs.
regards
 
SKmann said:
Thank you all for the reply, I suppose my main intention is not to expose to a much volatile situation. Currently I'm getting 2 year fixed at 2.3%, which is lowest in the market. I'm thinking of going for 2 year fixed for now and fix it for longer term after that. I hope in 2 years time Brexit effect and other financial down turn situation should be much more clear. what you guys think? appreciate your inputs.
regards
Click to expand...

How much will payments be as a % of your disposable income?

If it's low, there's not much point in fixing. It's more important if a rise in rates would really squeeze you.

Fixing is basically insurance against rates rising, and insurance is never free.
 
As username123 mentioned it is impossible, 10 years ago I would have said rates can't go negative and now look at most of european countries rates are heading that way if not already there.

Rates from Irish banks are pretty much as low they will go with the current participants, Irish banks must hold €50 of capital for every €1,000 of mortgage lending versus just €16 in Europe and the UK, therefore they are unlikely to drop in line with European counterparts.

The biggest reason to be able to get cheaper rates is from new participants in the market i.e. Non Banks who will not be held to same capital requirement.

So in my opinion the risk on rates rising is higher than rates lower over the long term. Having said that I think rates are not going to change much in 2 years thus my approach has been to fix for 2years, avail of a cashback deal and fix for the long term.
 
SKmann said:
Thank you all for the reply, I suppose my main intention is not to expose to a much volatile situation..
Click to expand...

But you haven't actually given us any figures to work on. What percentage increase would you be ok with for example. So if in 3 years from now 3% would hurt you financially than you should go the 5 year fix.
 
NoRegretsCoyote said:
How much will payments be as a % of your disposable income?

If it's low, there's not much point in fixing. It's more important if a rise in rates would really squeeze you.

Fixing is basically insurance against rates rising, and insurance is never free.
Click to expand...

Normally I'd agree. But the market at the moment is odd. Fixed rates (up to 5 years anyway) are below current variable rates. I'm looking at switching and even though I'm currently on variable, the fixed rates are certainly more attractive.

Having said that, I wouldn't personally choose a long fixed rate - I'd look at 2 years and re-fix at that point. I think the probability is of lower rates in the next couple of years rather than increasing rates.
 
I have been trying without luck to get a bank that will offer me a 15 year fixed rate...….
 
You must log in or register to reply here.
Back
Top