HELP! Fixed Rate or Variable?

D

Delphi

Registered User
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Hi Guys,

I am buying an apartment through the affordable housing and my broker has offered me 5 years fixed rate. I agreed to this but I am now worried that this would not be a good idea.

Borrowing 220,000 over 28 years from First Active. I have changed my mind because of the interest rates coming down but my broker told me that First Active are not passing on the lower rates to their customers. I have asked her if I could go on variable instead and she is to get back to me over the next few days.

Should I go with variable? I need to give her an answer in a few days time and would appreciate any advice thanks
 
Hey there.

Go variable I would think.

Variable are cheaper than fixed at the moment and rates will go down further due to more ECB reductions. You can fix later for a lower rate when the ECB rate reductions have bottomed out

By the way I just secured my mortgage for affordable housing with BOI and they were quite a bit cheaper than First Active at the time (October) though new buisness with BOI is gone up I think. Worth checking though.
 
Your broker OFFERED a fixed rate, as in he recommended fixed rate?

if he did, i'd question him on this, because he obviously is ripping you off. I cant believe any broker would not know that rates are going down. I'm sure he will make a bigger commission on a you taking this deal, thats why he is recommending it.
Some banks are not passing on full cuts, but if rates continue to drop, standard variables will drop futhure, maybe not by the full amount, but they will drop.
Go back to him and ask him why the fixed rate is better. If he says rates will rise again once they finish dropping, then tell him you'll fix when they bottom out.
If i was you i'd go direct to a bank and forget about this muppet.

This is all assuming he recommend the fixed and you didn't ask for it.
 
Senna said:
if he did, i'd question him on this, because he obviously is ripping you off.

I'm sure he will make a bigger commission on a you taking this deal, thats why he is recommending it.

If i was you i'd go direct to a bank and forget about this muppet.
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A pretty sweeping statement there Senna

First Active actually pay the lowest level of commission on the market at 0.5%. If she was recommending PTSB, IIB or Haven who pay 1% and their rates were not competitive then she would be ripping you off.

Delphi, has the broker mentioned that she is advising the 5 year fixed because First Active will give a bigger mortgage if you take this rate. Is affordability an issue?

If not then you should question why the broker is advising going on a fixed rate in the middle of an interest rate reduction cycle. As I said she will get the same commission regardless of whether you go on a variable rate or fixed rate.
 
First active would only give me the amount I needed if I fixed (other banks couldn't do anything for us at all). A compromise was that we went with their 50/50 mortgage - part variable, part fixed. I too am buying through AH. I wouldn't fix any of it for 5 years though, seems a bit long.

I was also talking to First Active a few days ago and was told that they do expect to cut their fixed rate a bit in the coming weeks - though the last time they did I think it was only .05% ??
 
The fixed vs variable rate is not as cut and dry as some of the posters above would suggest. Yesterday the credit markets froze up again, if this keeps happening the likelihood of each rate decrease being passed on to customers on variable rates will decrease. No doubt the ECB will continue to cut rates over the next year but there is no guarantee that the banks will pass these cuts on to borrowers on variable rates (trackers are a different story and if this is a new mortgage you are unlikely to have been offered a tracker).

The point I am trying to make is that you should not just assume that rates will continue to fall - in the USA fed rates are historically low but mortgage rates are stubbornly high still. There are even pundits out there that suggest that when this cycle of lower rates and money printing by central banks is over, that we could be in for an era of hyper-inflation which could cause rates to skyrocket.

Sorry if I am over complicating the issue - just want to offer a counterpoint to the "rates are falling" idea.
 
sanne said:
No doubt the ECB will continue to cut rates over the next year but there is no guarantee that the banks will pass these cuts on to borrowers on variable rates (trackers are a different story and if this is a new mortgage you are unlikely to have been offered a tracker).

The point I am trying to make is that you should not just assume that rates will continue to fall - .
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Even if the rate cuts are not passed on a variable rate is cheaper no ?

So why pay for a fixed rate thats guaranteed to be fixed at current rate rather than a variable that may, go down, or probably will go down ??
 
monkeyboy said:
Even if the rate cuts are not passed on a variable rate is cheaper no ?

So why pay for a fixed rate thats guaranteed to be fixed at current rate rather than a variable that may, go down, or probably will go down ??
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Depends on the lender.

There are some shocking variable rates out there e.g PTSB 5.75 - 5.85% for a new customer whereas a 3 year fixed rate elsewhere is 5.14%.
 
Right some of the variables rates on offer are shocking - I often wonder who in their right mind would ever borrow based on such a lousy rate and I have concluded that such a lender is simply not in a position to lend.

Another point on variable rates is that they are quick to rise and slow to come down when there are interest rate movements. Keep in mind also that the entire US housing market began to melt down because variable / teaser rates were offered and subsequently revised up when the fed raised rates. Anyone with a variable rate was part of the trillion dollar gamble that went bad.
 
NorfBank said:
A pretty sweeping statement there Senna

First Active actually pay the lowest level of commission on the market at 0.5%. If she was recommending PTSB, IIB or Haven who pay 1% and their rates were not competitive then she would be ripping you off.

Delphi, has the broker mentioned that she is advising the 5 year fixed because First Active will give a bigger mortgage if you take this rate. Is affordability an issue?

If not then you should question why the broker is advising going on a fixed rate in the middle of an interest rate reduction cycle. As I said she will get the same commission regardless of whether you go on a variable rate or fixed rate.
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I never considered that a fixed rate may give you a bigger mortgage. (dangerous in the current climate).
But regardless of this, i'd still question why the fixed rate is the best option. If affordability is not a problem, then i'd run from that broker. Something is not right.
 
Hi guys,

I was told today that the variable rate will be higher repayments than the fixed rate. Still trying to decide which one to go with but thanks for all the replies. Much appreciated.
 
If it s any help. I was in touch with PTSB today asking about the 0.5% drop on december 5th and got the following back..

“A customer will get the 0.5% discount whether they draw down now or not.
We are applying the 0.5% reduction to new and existing customers.

As this is a variable rate the reduction would be passed on regardless.”
 
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