KBC new 10 year fixed rate

[newirishman]

Gordon,
I'd like to overpay by as much as I can afford. I figure this amount to be €150 at the moment but hopefully it will rise in line with expected salary increases over the 10yr period.

I was originally budgeting to save the €150 into a savings account to be used for my child's college expenses in 16yrs time, but I'm leaning towards Brendan's argument that it would be more prudent to first repay the mortgage to a 'comfortable' level, then stop overpaying and start saving aggressively for college expenses. I admittedly need to figure out what year I'm supposed to switch from overpaying the mortgage but maybe the most important thing for now is to start the overpayments.

I can see the attraction of having the certainty that fixed rates bring, and i don't think average variable rates over 10yrs will be less than 2.99%, but I would like to be able to overpay as much as I can afford without being penalised.

So you like (full) flexibility for repayments, whilst the bank should provide fixed rate over ten years. That’s just not how fixed rate contracts work, usually. The banks calculations work because repayment amounts are fixed as well, so they know how much will be outstandig at the end of the 10 year period.

If you already know how much you are able to repay monthly, set the mortgage period accordingly and fixed based on that.
If you don’t want a defined commitment that can’t change over ten years, than clearly a fixed rate contract is not for you.

 

[lledlledlled]

As a quote from KBC, this does not surprise me. KBC have shown in the last few years that they do not always offer new and existing customers the same rates, and therefore many now treat them as an upward only variable rate option. Fixing is a better option in this case, and they should compete head to head with BOI. I do accept that KBC currently does have the existing customer offer, but there is no guarantee this will continue into the future. It is also worth noting that on the existing customer offer (at least), the customer would roll over onto new business rates when the fixed term expires. I imagine brokers are now wise to the way KBC work, and are advising customers accordingly.



I agree it would be an interesting comparison, but probably not a valid one. We all accept that repossessing properties here is a difficult ask, as well as the practice of paying to switch rather than the mortgage holder paying an arrangement fee. We need to be conscious of this in any comparison
I agree that for a LTV<60% it is still high - by around 0.5%, but for a LTV 60-80% I would say its a pretty good deal at 2.99%. I would argue that someone on a 25% LTV is not a 0.04% risk weighting below someone on a 75% LTV.


KBC have free banking if you lodge 2500 in each month (Extra Current Account). You could simply bounce your salary though that account to PTSB and use the KBC one as a psuedo cash-save account if you wished. Depending on the size of your mortgage, that 0.2% is valuable. On a 250k mortgage over 25 years it is 325 euro a year in extra interest paid. That's a meal out once a quarter or a hotel break once a year, and much better in your pocket than KBC's.

Thanks GNF, I didn't realise free banking was also available with KBC, with similar conditions as PTSB too by the looks of it. In that case, if i decide to switch to a KBC mortgage, I will likely move my current account there altogether.
I didn't like the sound of not being able to lodge cash but then again, I'm struggling to recall the last time I lodged cash in a bank!
It would be nice if they had a few more branches around, although they appear to have reasonable opening hours.

 

[lledlledlled]

Check with KBC if they do a split rate mortgage. Put say 75% on fixed rate and remaining on variable rate. You can pay off as much as you want on variable rate at anytime and have certainty on a large chunk for 10 years.

Thanks RedOnion, this seems like a great suggestion. Their website seems to suggest that this option is possible, so I think I might make an appointment to thrash out the specifics of how this would work.

I presume if 75% of my mortgage is fixed and 25% variable, each month my repayments would be split along these same %'s, i.e. 75% would go to the fixed portion of the mortgage and 25% to the variable. Then, any overpayment could go 100% against the variable portion, as this would be a (slightly) higher interest rate.

If the SVR overtook the fixed rate (as I suspect it will at various stages in the 10yrs), hopefully I can then start allocating the overpayment (or at least up to a value of 10%) to the fixed portion. I need to check that they don't regard the two portions of the mortgage as two separate mortgages though; otherwise if I wanted to overpay against the fixed portion, I might be confined to 10% of that 'mortgage' which would be a much lower figure.

 

[RedOnion]

I need to check that they don't regard the two portions of the mortgage as two separate mortgages though; otherwise if I wanted to overpay against the fixed portion, I might be confined to 10% of that 'mortgage' which would be a much lower figure.

That's my understanding of how they do it - you effectively have 2 accounts.
I'm not a customer, but a quick call to them should clarify it for you.

 

[lledlledlled]

That's my understanding of how they do it - you effectively have 2 accounts.
I'm not a customer, but a quick call to them should clarify it for you.

I called in to KBC about this. They confirmed it would be regarded as one mortgage account, just is split across two rates (i.e. fixed and variable) according to whatever % split the customer wants.
It is also up to the customer to choose which rate the overpayment is applied to.
So when the variable rate is higher than the fixed rate (as it is at the moment), the full overpayment can be applied to the variable rate portion. If the (currently 3.1%) variable rate drops to a level below the (2.99% for 10yrs) fixed rate, the overpayment can be applied to the fixed portion up to a limit of 10% of the total monthly due repayment, with the remainder of the overpayment going against the variable rate.

I think this is the perfect solution for me, even though I had no intention of making a 10yr commitment until this rate was announced last week. From the dealings I've had so far with KBC, the customer service seems to be way ahead of EBS also. I am a little nervous about some threads i've read about treatment of existing customers but i'm hoping it will be worth the risk.

 

[RedOnion]

Excellent, it's always best to check with the bank as they all have different systems, and slightly different ways of processing things.

 

[gnf_ireland]

I think this is the perfect solution for me, even though I had no intention of making a 10yr commitment until this rate was announced last week. From the dealings I've had so far with KBC, the customer service seems to be way ahead of EBS also. I am a little nervous about some threads i've read about treatment of existing customers but i'm hoping it will be worth the risk.

I actually think this is a very solid option for a lot of people and I do think the rate is pretty competitive (for Ireland) for a 10 year window. It should also not stop you from breaking the fixed term in the future, or at least getting the break fee calculated if a better offer comes up.

The question you now have is how much you want to fix versus keep variable? That will be very much a personal decision

To be fair to KBC, their customer service team is not that bad and you can normally get answers from them quickly enough.

Their treatment of existing customers has got better recently with the existing customer offer, but they have not committed to keeping this going into the future. They are also known as a bank which does not really do deals. You will read here that the likes of BOI will find lower variable rates to put certain customers on who complain/threaten to move etc. KBC does not appear to have this policy and simply always 'toe the corporate line' - so everyone gets treated the same. Some may prefer this, others may not.

On the positive, I think a reasonable priced 10 year fixed term product is a welcome addition to the mortgage options in Ireland. I look forward to the 20/25 year ones now (assuming sufficient take up in this one)

 

[Evie1962]

We took out a fixed rate mortgage with B of I in 1993 for 10 years. The rate was 10%!! In one sense it was a good move as the SVR was about 14% at the time, if not more. In another way it was a big mistake as almost immediately rates started to fall. We were stuck like that until 2003. B of I wanted about 6k old Irish punts as a breakage fee in about 1996- we only owed about 35k. We stuck it out and moved our mortgage in 2003 to EBS. Having topped it up a bit in 2003 it's now nearly finished thank God.
If i was advising anyone again I'd say 10 years is too long to fix- 5 would probably be better.

 

[lledlledlled]

I actually think this is a very solid option for a lot of people and I do think the rate is pretty competitive (for Ireland) for a 10 year window. It should also not stop you from breaking the fixed term in the future, or at least getting the break fee calculated if a better offer comes up.

The question you now have is how much you want to fix versus keep variable? That will be very much a personal decision

To be fair to KBC, their customer service team is not that bad and you can normally get answers from them quickly enough.

Their treatment of existing customers has got better recently with the existing customer offer, but they have not committed to keeping this going into the future. They are also known as a bank which does not really do deals. You will read here that the likes of BOI will find lower variable rates to put certain customers on who complain/threaten to move etc. KBC does not appear to have this policy and simply always 'toe the corporate line' - so everyone gets treated the same. Some may prefer this, others may not.

On the positive, I think a reasonable priced 10 year fixed term product is a welcome addition to the mortgage options in Ireland. I look forward to the 20/25 year ones now (assuming sufficient take up in this one)

Assuming the break fee is still minimal, only the associated legal fees would stop me switching in the future if better deals are announced elsewhere. Especially if the cashback offers cease at some point, as these offers are a nice bonus bit of cashflow as well as covering the legal fees.

I think I am comfortable with splitting it 75% fixed, 25% variable. I suppose it comes down to my opinion/guess on whether average variable rates over the next 10yrs will be higher or lower than 2.99%. I haven't a clue if they'll be higher but I don't believe they can/will be much lower than that figure. If I keep overpaying against the variable portion of the mortgage, there is a possibility I will clear this portion earlier than the 10yrs but I can monitor this and shift some of the overpayments to the fixed portion if that's the case, unless there are significant variable rate rises in which case I will be happy to pay off the full variable portion ASAP.

I was impressed with KBC's customer service; I was even offered a nespresso coffee when I called. Obviously this will all look like gimmicks and trickery if I end up experiencing issues the minute I sign up but I certainly think it's worth the risk, especially seeing I have found EBS customer service to be poor.

Good to hear KBC's treatment of existing customers has improved. I have asked them by email to confirm whether, after the 10yrs is up, I roll onto the standard variable rate available to new customers at that time. It would be concerning if they could just pick a rate out of the clouds when that day comes.

 

[gnf_ireland]

Good to hear KBC's treatment of existing customers has improved. I have asked them by email to confirm whether, after the 10yrs is up, I roll onto the standard variable rate available to new customers at that time. It would be concerning if they could just pick a rate out of the clouds when that day comes.

If you go onto variable initially, you could avail of their Existing Customer Offer. The terms and conditions of their Existing Customer Offer is explicit in that you move to new business rate for your LTV.

Section 25 in the below document (application pack)
"Unless otherwise agreed, at the expiry of your fixed term the then prevailing New Business PDH LTV Variable rate for your LTV Percentage (as determined on the Calculation Date) will be applied to your mortgage account"

[broken link removed]

I suppose it comes down to my opinion/guess on whether average variable rates over the next 10yrs will be higher or lower than 2.99%. I haven't a clue if they'll be higher but I don't believe they can/will be much lower than that figure.

Well you need to consider what the floor would be for the rates realistically? Do you believe they will hit 2.5%, 2%, below 2% ?
And how high could they go ? 4%, 5%, higher ?

10 years is a long time in the world of finance... we will probably hit another recession by then !!!

 

[lledlledlled]

If you go onto variable initially, you could avail of their Existing Customer Offer. The terms and conditions of their Existing Customer Offer is explicit in that you move to new business rate for your LTV.

Section 25 in the below document (application pack)
"Unless otherwise agreed, at the expiry of your fixed term the then prevailing New Business PDH LTV Variable rate for your LTV Percentage (as determined on the Calculation Date) will be applied to your mortgage account"

[broken link removed]



Well you need to consider what the floor would be for the rates realistically? Do you believe they will hit 2.5%, 2%, below 2% ?
And how high could they go ? 4%, 5%, higher ?

10 years is a long time in the world of finance... we will probably hit another recession by then !!!

Yes but I consider the bigger risk to be the sky, not the floor. Even if average variable rates over the 10yrs are lower than 2.99%, there has to be some sort of floor unless you think the bank is going to start paying us for the pleasure of loaning money to us.
I think it's far more likely that rates could rise above 5% than drop below zero.
Even if they did fall below zero, i'd put it down to bad luck but i should still be able to meet my repayments at 2.99%. If they went above 5%, i'd thank my lucky stars I fixed 75% of my mortgage.

Thanks for the link to the Terms & Conditions. That gives me a bit more comfort that I should at least get the New Business rate, whatever that is in 2027.

 

[gnf_ireland]

Thanks for the link to the Terms & Conditions.

Remember those are the T&C's for the Existing Customer Offer. You might want to check the T&C's to whatever you sign up to to make sure they contain the same statements

 

[lledlledlled]

We took out a fixed rate mortgage with B of I in 1993 for 10 years. The rate was 10%!! In one sense it was a good move as the SVR was about 14% at the time, if not more. In another way it was a big mistake as almost immediately rates started to fall. We were stuck like that until 2003. B of I wanted about 6k old Irish punts as a breakage fee in about 1996- we only owed about 35k. We stuck it out and moved our mortgage in 2003 to EBS. Having topped it up a bit in 2003 it's now nearly finished thank God.
If i was advising anyone again I'd say 10 years is too long to fix- 5 would probably be better.

Ouch, you must have lost out on a lot of money due to the interest rates over that period. I presume they fell by 5% or so in that time.
However, I don't think it's possible for rates to fall by 5% from 2.99%. It is very possible that they might rise by 5%.
Therefore, I see the 10yr period as being an advantage over a 5yr period.

 

[gnf_ireland]

If i was advising anyone again I'd say 10 years is too long to fix- 5 would probably be better.

It all depends on the rate. If the rates are high, and a chance of going higher, then I would agree to fix for a shorter term. If the rates are low, or reasonable, then I would suggest fixing for longer.
If someone offered me a 25 year mortgage at 0.1%, I would bite their hand off. If someone offered me a 5 year mortgage at 10% I would decline it.

That said, I do feel for you and I know others who got caught the very same way in the early 1990's.

 

[Gordon Gekko]

However, I don't think it's possible for rates to fall by 5% from 2.99%. It is very possible that they might rise by 5%

I'm struggling to understand the point you're making; is your view that rates won't fall from 2.99% to -2.01%, or that they won't fall from 2.99% to 2.84%?

The former is highly unlikely whereas the latter is eminently possible.

Similarly, are you contending that rates might increase from 2.99% to 7.99%, or that they might increase from 2.99% to 3.14%?

The former is highly unlikely, whereas the latter is eminently possible.

 

[gnf_ireland]

I'm struggling to understand the point you're making;

I think the point @lledlledlled is trying to make is personally they think that interest rates on a whole will rise over the next 10 years. Whether they are at their rock bottom or not now is unknown to all of us - including Mario Draghi probably to be fair.

 

[gnf_ireland]

The only other thing to keep in mind when fixing for 10 years is a guestimate of what the interest rate environment will be like in 10 years time. A total unknown I accept, but it is worth considering
For example, if I fix for 3 years and can then go onto new business rates, do I think new business rates will be reasonable at that stage
But if I fix for 10 years, is there a chance I will be badly burned when I exit the fixed period if we are in the middle of another recession. Hindsight in that case may have told me the optimum answer was to fix for 3 years and then fix for 10 years.

Without a crystal ball its hard to decide the best thing to do. One option is to always overpay a low fixed rate by sensible stress test amount (say 0.5 or 1%) mortgage permitting, so it cushions the shock of when you come off it. It also has the added benefit of saving money in the long term !

 

[Gordon Gekko]

I think the point @lledlledlled is trying to make is personally they think that interest rates on a whole will rise over the next 10 years. Whether they are at their rock bottom or not now is unknown to all of us - including Mario Draghi probably to be fair.

Perhaps. Personally I believe that making predictions regarding Irish mortgage rates is fraught with danger. Eurozone norms are sub 2% and we're at 3-3.5%. 10 years from now the Eurozone norm could be higher but the Irish norm could be lower. I take a simple view; if the bank "wants" me to fix for 3% over 10 years, in all probability I'll do better by not fixing.

 

[lledlledlled]

I'm struggling to understand the point you're making; is your view that rates won't fall from 2.99% to -2.01%, or that they won't fall from 2.99% to 2.84%?

The former is highly unlikely whereas the latter is eminently possible.

Similarly, are you contending that rates might increase from 2.99% to 7.99%, or that they might increase from 2.99% to 3.14%?

The former is highly unlikely, whereas the latter is eminently possible.

I meant the former in both cases. It was in the context of a response to a previous poster.

My 1st point was that I think it is almost impossible to argue that interest rates will fall by 5% (as they did for the poster I was responding to) to -2.01%, so I'm unlikely to lose out much by fixing at 2.99%.

My 2nd point was that it would be more likely, over the course of 10yrs that interest rates would rise to 7.99%. I agree it is not very likely, but in my opinion it is more likely than them falling to -2.01%. Do you disagree?

 

[lledlledlled]

I think the point @lledlledlled is trying to make is personally they think that interest rates on a whole will rise over the next 10 years. Whether they are at their rock bottom or not now is unknown to all of us - including Mario Draghi probably to be fair.

Almost correct! I believe, on balance, that the average variable rate over the next 10yrs is more likely to be higher than 2.99% than it is to be lower than 2.99%.

Further to this, if I end up being wrong about this, I believe the higher risk to me (and more negative consequence to my finances) is a large increase (rather than large decrease) in rates.

In short, if they go really high, i'll be delighted i fixed. If they go really low, it won't have a drastic impact on my finances.

In order to hedge my bets, I intend leaving 25% of the mortgage on variable rate.