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

1) Existing tracker margin. ECB + 0.85%

2) If you have an additional mortgage on the same property, what is the rate? NO

3) Amount outstanding on your mortgage €114, 500

4) Remaining term 12 YEARS
5) Lender AIB
6) Value of your home €800,000
7) Might you trade up or overpay your mortgage? NO
8) Do you face any barriers to switching? NO
9) What rates are you considering fixing at? UNSURE
10) Does your house have a high BER rating which might qualify it for a lower rate? NO
11) How well could you handle a further 2% rise in the ECB rate? Just about manageable short term.

Thank you for any advice.
 
You will shortly be paying 5.1% (ECB 4.25% + 0.85%)

Here are the main options for fixing with AIB


By fixing for 5 years, you would save 0.45%

If ECB rates rise further, you will save a bit more.


Let's say you fix at 4.65% and the ECB rate falls to 3%. You would be paying 4.65% instead of 3.85%.

While it is very difficult to forecast interest rates, in the medium term, I think that there is more scope for rates to fall than to rise.

So, on balance, I think you should stick to your tracker.

Brendan
 
1. Split mortgage.
1A. Ecb Tracker now at 6.25%
1B. Fixed at 2.35%. This rate ending in June 2024.
2. Outstanding.
Tracker: €151000.
Other: €38000.
3. Remaining term.
Tracker expires March 2043.
Other expires March 2035.
4. Lender AIB.
5. Value. €500k+
6. We might try to overpay our loan. Yes.
7. Barriers to switch. No.
8. What rates fix at. Don't plan on fixing.
9. BER rate is pretty poor.

Hi Brendan,
Please see above.
We are barely making ends meet atm.
Any advice please.
Thanks.
 
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Neevis said:
1A. Ecb Tracker now at 6.25%
Click to expand...

So you are on a rate of ECB +1.75% ? Is that correct?

This is not a very valuable tracker, so you should not worry about giving it up.

Your LTV is <50% , so here are the rates available to you.



These rates are odd as are all mortgage rates. The variable rates should be lower than the fixed rates in a period when market rates generally are expected to fall.

So I would expect the fixed rates to fall but there is no guarantee.

A variable rate below the ECB rate makes no sense so maybe this will be increased.

But, on balance, I would just switch the tracker bit to the variable rate.
 
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Hi Brendan, yes it's ECB + 1.75%.
Thanks for the advice, appreciate it.
 
existing tracker margin .75% (I’ve been told AIB add an additional 1% to retain their tracker, so I think it would be 1.75% ontop of the ECB rate)
2) Amount outstanding on your mortgage 197K
3) Remaining term 16yrs
4) Lender AIB
5) Value of your home current home 650k
6) Might you trade up or overpay your mortgage? Yes
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? AIB Green 5 year at 3.2
9) Does your house have a high BER rating which might qualify it for a lower rate? Yes
Hi, I’d be soo grateful for your reply. Currently sale agreed on our own home, which has a tracker mortgage of 197k remaining on it. Looking to buy a new house and wondering whether we should retain the tracker portion of our mortgage or give it up. Tracker portion would be 197k, with a new additional mortgage of 250k. ECB currently 2.15, with .75 margin. AIB would ad an additional 1% to retain it. So that portion of the mortgage would be 3.9% for 16 years. We would be getting a new mortgage for the balance on our new home of 250k. Currently considering the AIB 5 year Green mortgage LTV <50% at 3.2%. Would it not therefore be cheaper to get the whole new house mortgage on the Green mortgage rate, rather than paying 3.9% for the tracker portion? I’d be soo grateful for any advice as I am confused by it all. Thanks soo much.
 
A margin of 1.75% is not really cheap anymore.

AIB is expensive for non-green mortgages but good value for its green customers. As you qualify, your decision to go for a green rate of 3.2% for the whole mortgage is correct.

One thing you might consider is the Avant Flex mortgage which tracks the euribor rate.

Best Buy - The Avant Tracker mortgage is a clear Best Buy and people should consider switching to it

The fee to switch in contract takes the good out of it at the minute What is the balance on your mortgage? What fee are they quoting? Which lender?
www.askaboutmoney.com

I assume your LTV will be below 80%? If so, your margin would be .9% so your rate for the next year would be 2.98%

But you would have a margin of 0.9% for the life of your mortgage. With a mortgage of €450k, it's worth considering.

Of course, euribor rates could rise and you might regret not fixing with AIB. But they could also fall and you would be paying even less.

The Avant mortgage is not a fixed rate, so if you want to pay it off quicker, you can do so without penalty.

Brendan
 
Hi Brendan. Many thanks for your reply. However according to my own calculations I still think it’s beneficial to keep the tracker, as I would save 30k in interest. Maybe I didn’t explain the situation properly.
I have an existing tracker mortgage, and we are selling and getting a new house. Scenario one is that we keep the existing tracker (€197,000 @ 3.9% (2.15 + 1.75% margin) for a remaining term of 16 years), and get an additional mortgage on a different rate (€245,000 for 23 years). Either use the standard variable or the AIB green at 3.2% for an example). Scenario two is that we give up the tracker, and get a mortgage for 442,000 on the rate we used for the additional mortgage in secanrio one. If we chose scenario one our monthly repayment would be about €400 extra, but we’d save 30k in interest compared to scenario 2. So am I right in saying that the monthly repayment for the 2 combined would be more than if you gave up the tracker, and therefore people think it’s more expensive so they give it up. However you would pay a significant amount less in overall interest if you kept the tracker. So it’s worth it to keep it if you can afford the higher monthly payment now, cause youl pay less interest over the lifetime of the loan.
 
forget looking at 23 years and look at the interest rate. Which is higher ?

The ECB rate is 2.15% at the moment. The margin will be 1.75%. So your mortgage rate on the tracker element will be 3.9%

The Green rate is 3.2%

So whatever calculation you are doing is wrong. 3.9% is higher than 3.2% so the interest charge will be higher if you keep your tracker.

Brendan
 
But the tracker portion would be 197,000 at 3.9% for 16 years, or if that portion was accumulated along with a new mortgage it would be 197,000 @ 3.2% for 23 years. So it’s less interest that would be paid, you’d save 30k.
 
Scenario 1 has 197k on a 16 year mortgage at 1.75% above ECB (3.9%) + 245k for 23 years at 3.2%. So obviously an interest saving on scenario 2 as there's 7 years less interest to pay!

Interest on scenario 1 = 170k
Interest on scenario 2 = 183k

A difference of 13k
If the tracker stayed at 0.75 margin, the interest difference would be 30k, but the extra 1% is costing over 16k in interest (16261.05 to be precise)



Why no go for a simple 20 year mortgage on the entire? - €2495/month. Total interest if the 3.2% rate applied for entire term 159k)

or avant 20 year fixed of 3.4% + 1% cashback - cost €2540 and will never change. (167k interest)

Scenario 1 has you paying €1340 (tracker based on current ecb + extra 1%) and 1255 for the 245k over 23 years. So 2595/month. Total interest 68k + 102k - 170k

So using the 20 year term for the entire sees less interest than the scenario one option.
Also remember you are paying about €1k a year on mortgage protection insurance.

This mortgage calculator is best for odd numbers of years - https://www.calculator.net/mortgage-calculator.html?
Untick the "include taxes" box and reduce the "downpayment" to zero.
 
LisaK123 said:
2) Amount outstanding on your mortgage 197K
3) Remaining term 16yrs
Click to expand...
LisaK123 said:
with a new additional mortgage of 250k for 23 years
Click to expand...

Interest rate on tracker 3.9%
Interest rate on Green mortgage 3.2%

Stop looking at the total interest over the full term of the mortgage. It leads people to wrong decisions because they are unable to integrate different terms and interest rates into the decision.

Look at the annual interest cost.

If you are paying 3.9% on one option and 3.2% on another option, the annual interest cost will be lower on the 3.2% option.



Annual savings by putting the whole mortgage on the tracker: €1,379

The €250k over 23 years will be the same whichever option you choose, so let’s just look at the €197k.

Option 1 Repay €197k @ 3.9% over 16 years: Monthly repayments: €1,380

Option 2A Repay €197k @3.2% over 23 years: Monthly repayments : €1,009

So under Option 1, you are paying €371 a month more each month for 16 years.

What I am suggesting, is that you move the whole mortgage to 3.2% over 23 years.

But voluntarily “overpay” your mortgage by €371 a month.

You will save more interest because you are paying a lower interest rate.
 
Brendan Burgess said:
Option 1 Repay €197k @ 3.9% over 16 years: Monthly repayments: €1,380

Option 2A Repay €197k @3.2% over 23 years: Monthly repayments : €1,009
Click to expand...

Just in case you are not following it...

The reason you calculated that you are paying less interest, is because you are repaying the more expensive loan over a shorter period.

Let's exaggerate to make the point.
Say I borrow €1,000 on an interest-only basis (to keep the calculations simple)

Scenario 1: The rate is 5% over 10 years - so I will pay €50 a year, or €500 in total.
Scenario 2: The rate is 40% over one year - so I will pay €400 a year and as the loan is only for a year, then I will pay a total of €400.

By your reasoning, you are better off with Scenario 2 because you pay less interest!

Of course, what you should do is take out the rate of 5% over 10 years, and repay it in full after one year, thus saving yourself €350 in interest.
 
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