Should I switch from a tracker mortgage to fixed rate mortgage?

[daymoh]

I currently have a split rate mortgage on my home with PTSB. There is about 20 years remaining in the term. My LTV is < 60%.

The rates are as follows:
e129k is on a tracker at ECB+2.25%
e80k is at 3.3%

Given how attractive long term fixed rate mortgages are I'm very tempted to switch to something like the Avant 20 year mortgage. Over the same term, it looks like the the Avant 20 year mortgage (LTV < 60) would only be e15 a month more expensive to what I currently pay. This seems like a good deal to me but a few people have told me that I would be crazy to sacrifice my tracker..

What are your thoughts?

 

[Brendan Burgess]

Don't look at repayments.
To do a fair comparison, just look at interest rates.

a few people have told me that I would be crazy to sacrifice my tracker..

That comes from the time when trackers were at .5% above the ECB rate. With a rate of 2.25% it's not that clearcut, and you are right to ask the question. And when part of your mortgage is at 3.3% it's essential that you shop around.

e129k is on a tracker at ECB+2.25% = €2,900
e80k is at 3.3% = €2,640
Total interest per year: €5,540
€209k @ 2.65% = €5,540

You can fix with Avant for 20 years at 2.45%
€209k @2.45% = €5,100
So you would be saving €440 a year.
It would take you about 4 years to get back the cost of switching.

Are you sure you are going to have your mortgage for 20 years?

Would you consider fixing for 7 years at 1.95%
€209k @1.95% = €4,075 a year

So you would recover the cost of switching in 18 months or so.

 

[Brendan Burgess]

So what is this tracker worth?

It's worth something, but not much.

ECB rates are expected to rise and mortgage rates will rise with them.
But you can fix for 10 years or even 20 years at a lower rate.

So giving up your tracker, should not be a consideration.

Brendan

 

[daymoh]

Are you sure you are going to have your mortgage for 20 years?

Thanks for confirming what I thought regarding giving up the tracker. I guess I presumed it was a good idea to let inflation eat away at the mortgage over a longer time frame and it would allow me to focus on maximizing pension contributions at 40% rate.