Key Post I have an AIB tracker – should I consider fixing?

[Brendan Burgess]

Some general comments which apply to most AIB cases.

Apart from the shocking treatment of tracker customers, AIB has treated its mortgage customers fairly – well, fairly in comparison to other lenders.

• It does not maintain an artificially high default variable rate, and so lazy or busy customers coming off fixed rates don't find themselves paying a super-high rate. (The default variable rate for a customer with >80% LTV with AIB is 3.15% compared to 4.5% for Bank of Ireland.)
• It allows existing customers to avail of the rates on offer to new customers (even though we had to embarrass them into changing their policy on this)
• It does not try to trick customers with very large cashback
• It had an unfair way of calculating break fees, but again we embarrassed them into bringing this into line with their legal obligations and, in fact, customers can benefit from a peculiarity in the result.

Conclusion: AIB is likely to be good value in the long term, so you do not need to consider switching to another lender.

The normal considerations apply:

• If you fix, assume you will not get your tracker back when the fixed rate ends
• If you have an expensive tracker, say, ECB + 1.75% or higher, you should probably fix
  • Note: "ECB + 1.75%" means "European Central Bank rate plus an extra 1.75%" (a margin of 1.75%). Check your mortgage contract.
  • See here for AIB's fixed rates
• If you are planning to trade up or overpay your mortgage, you probably shouldn't fix, as you may face early repayment penalties on a fixed rate, which don't apply to trackers
  • But if your tracker is not particularly "cheap" (e.g., if it's ECB + 1.5% or higher), you could consider fixing on AIB's "green" rate or some of their other rates. That is because it is quite likely that you will be able to make unlimited overpayments (or break out of your fixed rate to move home) without penalty for the foreseeable future. (See this thread for info on which fixed rates this quirk applies to.)

If you have an outstanding complaint with the Ombudsman about the Prevailing Rate issue or some other issue...

Don't let this influence your decision.

• If the Ombudsman rejects your complaint, it will be irrelevant
• If the Ombudsman upholds your complaint, the fact that you have fixed will be taken into account

Some AIB mortgage contracts allow you to return to your tracker after fixing
In most cases, when you fix, you lose your right to your tracker. But if your mortgage contract is crystal clear, then you could consider fixing. But it must be crystal clear and the margin must be specified, e.g., "At the end of any fixed rate period, you will have the option of returning to the tracker rate specified in Condition..." Get it in writing from your lender that you can return to this actual rate.

Some contracts say "You will be offered a tracker at the then prevailing rate". That is no good to you, as the prevailing margin at that time may well be 3.5%.

Be careful not to spend so much time arguing this with AIB that fixed rates have risen in the meantime.


If you want to ask whether you should fix or not, please provide the following information:
1) Existing tracker margin. (This is set in your mortgage contract.)

• If your tracker margin is 1%, please state it in the following format to avoid confusion: ECB + 1%

2) If you have an additional mortgage on the same property, what is the rate?

• E.g., "Fixed at 2% with three and a half years of the fixed-rate period remaining."

3) Amount outstanding on your mortgage

• If you have both a tracker and a second mortgage on the property, specify the amount outstanding on each

4) Remaining term
5) Lender
6) Value of your home
7) Might you trade up or overpay your mortgage?
8) Do you face any barriers to switching? E.g., an impaired credit record, a mortgage with a warehoused portion due to a restructuring, reduced income since you took out your mortgage, you are now renting out the property.
9) What rates are you considering fixing at?
10) Does your house have a high BER rating which might qualify it for a lower rate? Check it here or estimate it if necessary.
11) How well could you handle a further 2% rise in the ECB rate?

 

[danika05]

If you want to ask whether you should fix or not, please provide the following information:

1) Existing tracker margi
1) Existing tracker margin
2) Amount outstanding on your mortgage
3) Remaining term
4) Lender
5) Value of your home
6) Might you trade up or overpay your mortgage?
7) Do you face any barriers to switching? E.g. an impaired credit record, a mortgage with a warehoused portion due to a restructuring, reduced income since you took out your mortgage.
8) What rates are you considering fixing at?
9) Does your house have a high BER rating which might qualify it for a lower rate? Check it here or estimate it if necessary.
2) Amount outstanding on your mortgage
3) Remaining term
4) Lender
5) Value of your home
6) Might you trade up or overpay your mortgage?
7) Do you face any barriers to switching? E.g. an impaired credit record, a mortgage with a warehoused portion due to a restructuring, reduced income since you took out your mortgage.
8) What rates are you considering fixing at?
9) Does your house have a high BER rating which might qualify it for a lower rate? Check it here or estimate it if necessary

1) Existing tracker margin .95%
2) Amount outstanding on your mortgage 292k
3) Remaining term 17yrs
4) Lender AIB
5) Value of your home 540k
6) Might you trade up or overpay your mortgage? No
7) Do you face any barriers to switching? E.g. an impaired credit record, a mortgage with a warehoused portion due to a restructuring, reduced income since you took out your mortgage.No
8) What rates are you considering fixing at?
9) Does your house have a high BER rating which might qualify it for a lower rate? Check it here or estimate it if necessary. No

Hi Brendan, would really appreciate your wisdom on fixing our mortgage, whether that means switching or stay with AIB. Should we even be considering giving up our tracker? Fix for 5 years or for the remainder of our mortgage term?

Thanks

 

[Brendan Burgess]

Hi danika

1) Definitely don't switch to another lender.
2) 0.95% margin is in the middle ground somewhere between Great Value on the one hand and an expensive tracker on the other, so the decision is more difficult.
3) Definitely don't give this up for a short-term fix i.e. anything less than 5 years.

Assuming ECB rates of 2% for the next few years, you will be paying around 3% on your mortgage, but it could be higher or lower than this.

Here are the fixed rates from AIB for < 80% Loan to Value.



4 years is too short and too expensive.
7 years is too expensive.

So the only remaining question is should you give up a tracker of ECB +0.95% for a rate of 2.45% fixed for 5 years?

It's very close. On balance, I think that there is more scope for ECB rates to rise above 2% than there is scope for them to fall below 2%.

Conclusion: Fix for 5 years but it's close.

 

[dam099]

1) Existing tracker margin .75%
2) Amount outstanding on your mortgage 112k
3) Remaining term 10yrs
4) Lender AIB
5) Value of your home 370k
6) Might you trade up or overpay your mortgage? No
7) Do you face any barriers to switching? E.g. an impaired credit record, a mortgage with a warehoused portion due to a restructuring, reduced income since you took out your mortgage.No
8) What rates are you considering fixing at? 5 yr fixed 2.35% (if still available after todays increase)
9) Does your house have a high BER rating which might qualify it for a lower rate? Check it here or estimate it if necessary. No

Hi Brendan,

I am a bit on the fence on this one so would appreciate a second opinion. I am considering fixing with AIB on their 2.35% 5 year rate (if I haven't missed the boat on the rate).

Thanks,

Damian

 

[Brendan Burgess]

1) Existing tracker margin .75%

So when the ECB rate hits 2%, you will be on 2.75%

You can fix for 2.35% so you save .4% for the first 5 years.

After 5 years, the balance will fall to €60,000


So even if the rates are higher then than they would be if you stayed on your tracker, you will be paying the difference on a much lower mortgage.

Fixing for 5 years seems right.

Brendan

 

[Cailte53]

Hi Brendan, like others here, I don't know whether to keep my tracker or give it up and look to switch to a fixed rate. Stats below:

1) Existing tracker margin. .75
2) Amount outstanding on your mortgage. 110k
3) Remaining term. 8 years 8 months
4) Lender. AIB
5) Value of your home. 365k
6) Might you trade up or overpay your mortgage?
We were thinking about it but not for five years.
7) Do you face any barriers to switching? E.g. an impaired credit record, a mortgage with a warehoused portion due to a restructuring, reduced income since you took out your mortgage.
No
8) What rates are you considering fixing at?
No idea really.
9) Does your house have a high BER rating which might qualify it for a lower rate?
Highish- I just completed a recent retrofit on my house and BER was assessed at C1

 

[Brendan Burgess]

1) Existing tracker margin. .75
2) Amount outstanding on your mortgage. 110k
3) Remaining term. 8 years 8 months
4) Lender. AIB
5) Value of your home. 365k

OK, so when the ECB rate rises to 2%, your rate will be 2.75%

You could fix for 5 years at 2.35%

For the last 3 years and 8 months you will have lost your cheap tracker, but the balance will be very small by then, so it's less important what the rate is.

It really is a toss up. But because your margin is low at .75%, making a wrong call won't cost you much either way.

If you force me to come down on one side or the other, I would say that you should retain the tracker as it's more flexible for overpayments and trading up.

Brendan

 

[Cailte53]

OK, so when the ECB rate rises to 2%, your rate will be 2.75%

You could fix for 5 years at 2.35%

For the last 3 years and 8 months you will have lost your cheap tracker, but the balance will be very small by then, so it's less important what the rate is.

It really is a toss up. But because your margin is low at .75%, making a wrong call won't cost you much either way.

If you force me to come down on one side or the other, I would say that you should retain the tracker as it's more flexible for overpayments and trading up.

Brendan

That is very helpful, Brendan, thank you so much.

 

[chris06]

1) Existing tracker margin. .95
2) Amount outstanding on your mortgage. 65k
3) Remaining term. 11 Years
4) Lender. AIB
5) Value of your home. 385k
6) Might you trade up or overpay your mortgage? Not sure

7) Do you face any barriers to switching? E.g. an impaired credit record, a mortgage with a warehoused portion due to a restructuring, reduced income since you took out your mortgage.
No
8) What rates are you considering fixing at? 2.35

9) Does your house have a high BER rating which might qualify it for a lower rate? No

Hi Brendan, we are really considering fixing with AIB at 2.35, but so unsure, what is your advice please ?Many thanks

 

[Brendan Burgess]

1) Existing tracker margin. .95
2) Amount outstanding on your mortgage. 65k
3) Remaining term. 11 Years

1) Assuming an ECB rate of 2%, you will be paying 2.95%
2) So 5 years at 2.35% would be better.
3) You will lose your tracker, but that won't matter too much. After 5 years your balance will be down to €38k so even if the rates on offer are higher than ECB +0.95% it won't make too much of a difference.
4) But it's a close enough decision either way. If you think that you might trade up or overpay, then a tracker mortgage is more flexible when it comes to overpayments.

 

[Track2019]

Hi, brendan, not sure if we should fix our tracker mortgage or not. Only a small portion of our mortgage on tracker. Is it even worth changing to fixed?

1) Existing tracker margin 0.75%
2) Amount outstanding on your mortgage €29k
3) Remaining term 17 years
4) Lender AIB
5) Value of your HOME €350k
6) Might you trade up or overpay your mortgage? No
7) Do you face any barriers to switching? E.g. an impaired credit record, a mortgage with a warehoused portion due to a restructuring, reduced income since you took out your mortgage. No
8) What rates are you considering fixing at? 2.35% 5 year fixed LTV < 50%
9) Does your house have a high BER rating which might qualify it for a lower rate? Check it here or estimate it if necessary. No

Our mortgage is a split mortgage with the majority of same (100k) fixed recently for 5 years at 2.35%. Smallest portion of mortgage is on tracker.
Would appreciate your advice. Thanks

 

[Brendan Burgess]

With €29k on tracker, it makes very little difference.

On balance, the flexibility of the tracker could come in handy. I know you say you won't overpay your mortgage, but plans change. If you have a bit on a tracker, you can overpay it without penalty.

Brendan

 

[chris06]

1) Assuming an ECB rate of 2%, you will be paying 2.95%
2) So 5 years at 2.35% would be better.
3) You will lose your tracker, but that won't matter too much. After 5 years your balance will be down to €38k so even if the rates on offer are higher than ECB +0.95% it won't make too much of a difference.
4) But it's a close enough decision either way. If you think that you might trade up or overpay, then a tracker mortgage is more flexible when it comes to overpayments.

Thank you very much Brendan

 

[Kramer]

1) Existing tracker margin ECB +.90%
2) Amount outstanding on your mortgage 105k
3) Remaining term 13yrs
4) Lender AIB
5) Value of your home 500k
6) Might you trade up or overpay your mortgage? No but currently investigating a top-up for an extension / renovation
7) Do you face any barriers to switching? E.g. an impaired credit record, a mortgage with a warehoused portion due to a restructuring, reduced income since you took out your mortgage.No
8) What rates are you considering fixing at? 5 yr fixed 2.35%
9) Does your house have a high BER rating which might qualify it for a lower rate? Check it here or estimate it if necessary. No

If 2.35% rate is still available can you advise whether this would make sense to fix for 5 years?

 

[Brendan Burgess]

Hi @Kramer

AIB treats existing customers fairly, so you are right to stay with them.
Fixing at 2.35% seems right.
You are giving up a tracker of ECB +.9% which will be about 2.9% when ECB rates hit 2%. ECB rates may come down again, but I doubt that they will come down to the 0% level we have been used to.

But it's close. If the fixed rate is not available, then stick with your tracker.

Not sure that topping up for a renovation has any implications. AIB will allow you borrow at their best rates for this top up. If you were with ptsb you would be stuck with their top up rate of 3.95% variable.

Brendan

 

[Dragonfly 47]

Hello
I was going to try take the hit and keep the tracker however I would appreciate advice.
I was one of the 300 cohort who got back the tracker mortgage at 1.75
Amount of mortgage outstanding is 270k
Remaining term 15 years
Current interest payment with increases is 2.99%
Value of home now is c.325k
Many thanks

 

[Brendan Burgess]

@Dragonfly 47

It is better to provide the information in the set format to get a comprehensive answer.

A 1.75% margin is worth nothing at this stage.

So maybe go for the 5 year fixed rate. That seems to be the best value.

Brendan

 

[TedBishop]

1) Existing tracker margin. (This is set in your mortgage contract.)
ECB + 1.75% with AIB, tracker retention product.
2) If you have an additional mortgage on the same property, what is the rate?
3% variable
3) Amount outstanding on your mortgage
94k
If you have both a tracker and a second mortgage on the property, specify the amount outstanding on each
9k on variable @ 2.75% 50% LTV
85k on ECB+1.75%

4) Remaining term
Variable is maybe 2 years
Tracker is 12

5) Lender
AIB

6) Value of your home
Well below 50% LTV as on those rates for years.

7) Might you trade up or overpay your mortgage?
Overpay defo. Plan to pay off variable shortly with lump sum.

8) Do you face any barriers to switching? E.g., an impaired credit record, a mortgage with a warehoused portion due to a restructuring, reduced income since you took out your mortgage, you are now renting out the property.
No

9) What rates are you considering fixing at?

2.1% Green 5 year (just for the tracker which is now 3%) with AIB however it was put on file with AIB on the 10th of this month and now they have sent out a letter to confirm that we want to move away from the tracker. I am concerned that they are trying to shaft me and will get the new green rate. [Moderator's note: the "new green rate" is 2.6%, after AIB's rate increases of 16th October.]

10) Does your house have a high BER rating which might qualify it for a lower rate?
Yes A2


So as they accepted our rate change on the 10th of Oct but have now sent a confirmation letter as it's moving off the tracker I am worried that they will give me the new rate.

I also read this that basically if the interbank rate is higher I can overpay the new fixed without fees.

Overpayment / re-fix flexibility of AIB's green 5yr fixed rate (and some other rates)

I think you can, see the first part in red below says "the applicable interest rate offered by the bank at the time the mortgage load is repaid or converted". It then point you to note 3 and Note 3 says they will use the one that generate the lower ERC if there is more than one applicable fixed...

www.askaboutmoney.com

 

[Brendan Burgess]

@TedBishop

With 12 years left and a margin of 1.75%, your tracker is worth very little.

You are already paying 3% on your mortgage with ECB rates of 1.25% and you will be paying 3.75% when the ECB rate increases.

So, fixing seems very clear. Even you are stuck with the 2.6% rate, it makes sense to fix for 5 years. ( So it makes even better sense to fix if you can get the 2.1% rate.)

The only small issue is your intention to overpay.

1) Pay off any capital you intend to pay first.
2) Tell AIB to reduce the term of the mortgage at the same time you are fixing, so the extra money will not be an overpayment. But make sure that you will be able to meet the new repayment or else you will be deemed to be in arrears.
3) If you want to make further out of course capital payments, you should be able to do so without penalty, because of a quirk in how AIB calculate their break fees. (This is a peculiarity of some of AIB's fixed rates and does not apply to other lenders.)


Brendan

 

[TedBishop]

@Brendan Burgess Thanks. I have 12 years left but I am not in a position to ask them to reduce the term right yet so it will be based on the old repayments. I plan to do point 3 a lot though and have it all paid off probably in 4 years or less.