Fixed rates
- Thread starter apd
- Start date
AFAIK you can't make additional repays to a fixed rate mtg. There is a penalty for repaying your mtg early, usually 6 mths interest. If you feel you are likely to repay small lump sums to your mtg there is nothing stopping you fixing 1/2 your mtg and keeping the rest on variable.
An alternative is to put your excess funds into a deposit which earns at or close to the fixed rate, such as Anglo/BOSI which pay upwards of 4.5%. Obviously you have to pay DIRT, but at least the funds are accruing and capitalising interest.
When your fixed period on the mortgage expires, transfer the deposit to the mortgage.
Further point, depending on the size of mortgage, you will be earning TRS on the Interest on the portion of mortgage which you have not paid off, somewhat offsetting the DIRT paid on the deposit.
Final point, I think if you can get fixed at anywhere around the 4.25 - 4.50 level for > 2 years would be worthwile allowing for 2 25 pip hikes on the ECB repo rate to 3.5% by Xmas '06. This 4.5% being similar to the depo rate mentioned at the start above. I don't see value or point in fixing to 5 years as the premium is too high with most banks, and also quite inflexible for most people unless you plan to stay in the same house for 5 years plus.
When your fixed period on the mortgage expires, transfer the deposit to the mortgage.
Further point, depending on the size of mortgage, you will be earning TRS on the Interest on the portion of mortgage which you have not paid off, somewhat offsetting the DIRT paid on the deposit.
Final point, I think if you can get fixed at anywhere around the 4.25 - 4.50 level for > 2 years would be worthwile allowing for 2 25 pip hikes on the ECB repo rate to 3.5% by Xmas '06. This 4.5% being similar to the depo rate mentioned at the start above. I don't see value or point in fixing to 5 years as the premium is too high with most banks, and also quite inflexible for most people unless you plan to stay in the same house for 5 years plus.
As Marksa says, the 5yr fixed is usually bad value (although at the moment 5yr int rates are around 3.90% and 5yr mortgage rates are 4.90% - usually the market/mortgage spread is wider the farther out you go, the banks building in more margin for error).
The main problem with Fixed rates are the break penalties if you decide to sell your house. But in a rising rate environment they don't really apply (since the bank can lend the money again at a higher rate) so it's probably only the admin penalties that you would be charged.
In terms of paying additional funds into your mortgage - there should be a formula on your loan doc which says what the penalties are. Usually works like: you pay 10k lump sum off the 3yr fixed mortgage. the bank calculates how much interest they would have earned on the 10k over the remaining term of your mortgage and charge you some portion of that amount.
The main problem with Fixed rates are the break penalties if you decide to sell your house. But in a rising rate environment they don't really apply (since the bank can lend the money again at a higher rate) so it's probably only the admin penalties that you would be charged.
In terms of paying additional funds into your mortgage - there should be a formula on your loan doc which says what the penalties are. Usually works like: you pay 10k lump sum off the 3yr fixed mortgage. the bank calculates how much interest they would have earned on the 10k over the remaining term of your mortgage and charge you some portion of that amount.
As ever ... don't fix in an attept to time the market and save money over a competitive tracker/variable rate. Chances are that you will pay a premium for the peace of mind that fixed rates/repayments bring you. If you can afford fluctuating variable rate repayments (e.g. if rates went up by a few %) then stick with the most competitive tracker/variable rate for your circumstances.
I fixed both halves of my mortgage last November for 2 and 3 years respectively.Its great at the moment as the rate on both is around 1% below current variable rates,but of course I face a big increase starting late next year if current interest trends continue or stagnate.
I'm just about to drawdown on our mortgage (I know this topic has been covered before but any quick input would be good as its been on my mind!) Going with a fixed rate for security of payments and also taking into account brokers advice that they think there will be 2 further interest rate rises before the end of the year.
What would be the thought on value of 2 year fixed (PTSB) at 4.39 or 3 year fixed for 4.6%?
Bearing in mind it will probably be at least 18 months - 2 years before we'll be in a position to start putting money aside to try and reduce term.
What would be the thought on value of 2 year fixed (PTSB) at 4.39 or 3 year fixed for 4.6%?
Bearing in mind it will probably be at least 18 months - 2 years before we'll be in a position to start putting money aside to try and reduce term.
If you are being quoted a fix rate for 2 years that is in and around the same as a standard variable,and you are looking for piece of mind,then I would go with that option.
Have you thought about splitting your mortgage in two?You could fix half of it and leave the other half on a variable/discount variable.
Have you thought about splitting your mortgage in two?You could fix half of it and leave the other half on a variable/discount variable.
Hi Sam78,
We are just about to draw down too with B.O.I. We decided on a 3yr rate at 4.69%. We figured the first year and half would fly in terms of spending on interior etc. The variable rate has gone up so it's matter of weeks before fixed rate increases yet again. For us, it's peace of mind.
Do you mind me asking how you got on with your snag list?
We are just about to draw down too with B.O.I. We decided on a 3yr rate at 4.69%. We figured the first year and half would fly in terms of spending on interior etc. The variable rate has gone up so it's matter of weeks before fixed rate increases yet again. For us, it's peace of mind.
Do you mind me asking how you got on with your snag list?
Called our broker and have gone with the 3 year fixed at 4.69 in the end, (just for peace of mind also!) as we know we can cover that and wont have to worry about rate rates what with the cost of ESB/GAS likely to shoot up as well 
Snag list went very well regardless, house was finished to a very good standard and only one or 2 minor things to be concerned about, bit of rough plastering here and there, sealant needed around the bath/shower that type of thing!
I wasnt aware (unfortunately!) before this thread came up that it was an option to split the mortgage in two, little too late for us now, but certainly good to know for the future - thanks for the info!
Snag list went very well regardless, house was finished to a very good standard and only one or 2 minor things to be concerned about, bit of rough plastering here and there, sealant needed around the bath/shower that type of thing!
I wasnt aware (unfortunately!) before this thread came up that it was an option to split the mortgage in two, little too late for us now, but certainly good to know for the future - thanks for the info!
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I don't get why so many people are fixing at higher rates than those available elsewhere in the market place, it clearly shows that they are not shopping around for the cheapest rate. I've just fixed for 3 yrs at 4.18...this has since gone up with the institution I'm banking with to 4.55% still cheaper than the 4.69% you've all been quoted.