Pay interest penalty on UB Fixed rate mortgage to re-fix at higher interest rate?

Hilda2021

Registered User
Messages
11
With all the uncertainty regarding the transfer of Variable Mortgages in Ulsterbank I've been trying to decide the best option for my Mortgage and Sub Account.
There is currently a remaining term of a little over 18 years, my 2 accounts will go back to Variable when fixed rate is up. My LTV is less than 40%.

Sub Account was fixed for 5 years earlier this year at 2.35% so happy with this for now as it represents less that 20% of the total mortgage.
Main Account has a balance of circa 83.5k currently on a 2.6% fixed rate until June 2023.
Ulsterbank currently have a 10 years fixed rate of 2.8% which appears to be the best fixed rate over that term.

My thoughts are to pay a penalty which will be a maximum of 6 months interest roughly €1085 or so and then re-fix for 10 years at the 2.8%.
My reasons for doing it is that if the loans are sold to PTSB (rumoured) then in June 2023 I will switch to their variable rate which is currently 3.95% and possibly will be higher by then. My main reasons for doing this is that I financially cannot afford to take a large interest rate hit over the long term which may make my repayments impossible to make so although I would pay a penalty now and a small interest rate increase I think it would give me 10 years of security knowing the payments due on this.

Does this make sense to do or am I missing anything? I don't forsee any big change in my personal financial circumstances any time in the future, thanks
 

Paul O Mahoney

Registered User
Messages
1,280
With all the uncertainty regarding the transfer of Variable Mortgages in Ulsterbank I've been trying to decide the best option for my Mortgage and Sub Account.
There is currently a remaining term of a little over 18 years, my 2 accounts will go back to Variable when fixed rate is up. My LTV is less than 40%.

Sub Account was fixed for 5 years earlier this year at 2.35% so happy with this for now as it represents less that 20% of the total mortgage.
Main Account has a balance of circa 83.5k currently on a 2.6% fixed rate until June 2023.
Ulsterbank currently have a 10 years fixed rate of 2.8% which appears to be the best fixed rate over that term.

My thoughts are to pay a penalty which will be a maximum of 6 months interest roughly €1085 or so and then re-fix for 10 years at the 2.8%.
My reasons for doing it is that if the loans are sold to PTSB (rumoured) then in June 2023 I will switch to their variable rate which is currently 3.95% and possibly will be higher by then. My main reasons for doing this is that I financially cannot afford to take a large interest rate hit over the long term which may make my repayments impossible to make so although I would pay a penalty now and a small interest rate increase I think it would give me 10 years of security knowing the payments due on this.

Does this make sense to do or am I missing anything? I don't forsee any big change in my personal financial circumstances any time in the future, thanks
I'm no expert on this but it seems that you want stability for the next 10 years, and that's ok, just remember you're going to pay a little more interest from the amounts you mentioned might be a few euro a month, but if that's what you want to do and if it eliminates worries or anxiety even better.
Even ask UB to add the penalty onto the 83.5k outstanding bring up to €85k that's not going to affect your ltv it isn't going to cost a huge amount but it does give piece of mind.

Hard to put a price on peace of mind.
 

Hilda2021

Registered User
Messages
11
I'm no expert on this but it seems that you want stability for the next 10 years, and that's ok, just remember you're going to pay a little more interest from the amounts you mentioned might be a few euro a month, but if that's what you want to do and if it eliminates worries or anxiety even better.
Even ask UB to add the penalty onto the 83.5k outstanding bring up to €85k that's not going to affect your ltv it isn't going to cost a huge amount but it does give piece of mind.

Hard to put a price on peace of mind.
Thank you for your reply, yes peace of mind is exactly what I'm looking for you hit the nail on the head thanks. I hadn't considered asking them to add it to the outstanding balance so I will check that out, thanks
 

Paul O Mahoney

Registered User
Messages
1,280
Thank you for your reply, yes peace of mind is exactly what I'm looking for you hit the nail on the head thanks. I hadn't considered asking them to add it to the outstanding balance so I will check that out, thanks
Hilda have a look at Avant, I just saw they have fixed mortgages up to 30 years at 1.98%....can't hurt.
 

Brendan Burgess

Founder
Messages
45,209
Main account €83,500 18 years left 2.6% Fixed to June 2023

Sub account 20,000 2.35% fixed until c 3/2026

Options on main account
  • Fix for 5 years at 2.35%
  • Fix for 10 years at 2.8%
Additional cost of fixing for 10 years over 5 years €80k .45% x 5 years = €1,800

If you fix for 5 years at 2.35% the €83k will be down to €63k , or €61k if you pay the interest savings off the mortgage.

At that stage you will have €61,000 with 13 years left at 2.35% would be a monthly repayment of €454

Let's say that interest rates rise to 4.5% in 5 years.

Your repayment will rise to €520.

That is not a lot different from the €490 you will be paying immediately if you fix at 2.8%.

The value in the market at the moment is in 5 year and other short-term fixed rates. No one knows the answer, but my gut feel would be to fix for 5 years and use the savings to reduce the capital.
 

Brendan Burgess

Founder
Messages
45,209
My thoughts are to pay a penalty which will be a maximum of 6 months interest roughly €1085

Have you been quoted a break fee?

I am not sure that I would pay a break fee of €1,000 to fix again at a higher rate.

If you fix for 5 years, you will save .25% for two years. On €83,000 that is €400.

I think we are at least 6 months away from your loan being sold to permanent tsb. So I don't think you need to do anything drastic.

If the break fee is less than €400, then break and refix for 5 years.

If it's more than €400, I wouldn't do anything for the moment, but keep it under review.

Again, the future is uncertain. And there is a risk that if you do nothing, Ulster Bank will up their fixed rates in the meantime.

But on balance, I would not pay €1,000 break fee.

Brendan
 

peemac

Registered User
Messages
1,015
When you exit a fixed rate can't you just start another fixed rate. Ptsb are not the most competitive, but they do have 7 year fixed at 3%

Also at 40% LTV, the variable rate is 3.6% - still rather high.
 

Hilda2021

Registered User
Messages
11
Have you been quoted a break fee?

I am not sure that I would pay a break fee of €1,000 to fix again at a higher rate.

If you fix for 5 years, you will save .25% for two years. On €83,000 that is €400.

I think we are at least 6 months away from your loan being sold to permanent tsb. So I don't think you need to do anything drastic.

If the break fee is less than €400, then break and refix for 5 years.

If it's more than €400, I wouldn't do anything for the moment, but keep it under review.

Again, the future is uncertain. And there is a risk that if you do nothing, Ulster Bank will up their fixed rates in the meantime.

But on balance, I would not pay €1,000 break fee.

Brendan
Thanks Brendan, your calculations make things clearer for me. I haven't looked for the breakage fee yet but it says a max of 6 months interest but il ask them for breakage fees and work from there, appreciate all the replies.
 

Hilda2021

Registered User
Messages
11
When you exit a fixed rate can't you just start another fixed rate. Ptsb are not the most competitive, but they do have 7 year fixed at 3%

Also at 40% LTV, the variable rate is 3.6% - still rather high.
Thanks Peemac, my fear is that the fixed rates will have risen by June 2023.
 
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