Thinking of switching to 10 year fixed

[flusteredma]

Not sure if this is the right place but just came off introductory mortgage rate and have just switched to tracker. We are considering going on a fixed 10 year rate if we can get PTSB to match the lowest market rate of 4.99 before the rate goes up again. can someone direct me to the latest discussion on fixed rates or advise? Can you sell your home without penalties if you come out of a fixed rate mortgage? Thanks!

 

[BigM]

FYI current 10yr Market Rates are around 3.95%.

The question of whether to Fix or Float depends on your attitude to risk. If you prefer to know exactly how much your payments are going to be and not have to worry about the effect of German unemployment/inflation etc on your mortgage rate, then fixing is probably for you.
You can plan your finances/savings/investments in the knowledge that your mortgage isn't going to change.

Of course, this certainty comes at a price. The long-term fixed rates generally work out more expensive than the equivalent variable/tracker/shorter-fixed but you have to expect a premium for the stability they afford you.

I wouldn't worry too much about fixing the rate before Dec7th - this rate rise is 100% priced into the market (indeed, it has been for the past few months) so there shouldn't be much change in the Mortgage rates.

Personally, I don't like long-term fixed rates because it can sometimes be difficult to pay down large sums off your mortgage whenever you receive a lump sum (bonus, SSIA etc). In a rising rate environment there should be no 'break costs' (other than maybe admin costs) since the bank can lend the money again at a higher rate.

The problems really start if the rates start to fall again at some stage over the next 10 years. If you look to sell the house/redeem the mortgage to switch to lower rates, the banks claw back the break cost - the difference between what they would have earned from you over the remaining term and what they can lend the money at now. This break cost can often wipe out any savings you might make by switching - or it can be an expensive extra cost when you go to sell.

Take a look at the thread above - some of the posters expect v high rates over the next 2 years, in which case 5% fixed would seem an absolute bargain!

 

[NorfBank]

And no you cannot sell your home w/o penalties on a fixed rate. If you redeem the mortgage before the end of the fixed period, there will be a redemption penalty.

 

[Sarah W]

Not necessarily. Some lenders will allow you to 'take' your fixed rate mortgage with you if you move house - some will repay the penalty if you take a new mortgage with them. Also some will allow you to repay an extra 5-10% of the capital each year without penalty. Check the T&Cs.

Sarah

www.rea.ie

 

[HighFlier]

Latest indications in this mornings news is that yesterday the ECB hinted at a less aggressive rate rise policy than heretofore because of poor business sentiment and falling spending and inflation in Germany. Some are saying that rates could now peak next year at 50 basis points above where they are now and stabilise or fall from there.

 

[Eurofan]

Latest indications in this mornings news is that yesterday the ECB hinted at a less aggressive rate rise policy than heretofore because of poor business sentiment and falling spending and inflation in Germany.

Would be a bit of a turnaround for them, the ecb has been very specific that it won't comment on future (i.e. '07) direction other than the usual 'rates are still accomadative' and moving to a more normal level.

Who was reporting those indications this morning and from whom?

 

[HighFlier]

Was on the times or the indo. Possibly Trichet himself or one of his deputies. In fairness ghe guy who wrote the article made your very point that advance warnings were a feature in U.S. but not normally inEurope.

 

[BigM]

Check the T&Cs.

Exactly.
My point was that when rates are going up the banks make money if you break your fixed rate. When rates are going down they lose money when you break your fixed rate.

They will still charge some fee/penalty (usually laid out in the T&Cs) but this is more an admin charge than a cost so you can possibly get this admin fee waived.

 

[Eurofan]

Was on the times or the indo. Possibly Trichet himself or one of his deputies. In fairness ghe guy who wrote the article made your very point that advance warnings were a feature in U.S. but not normally inEurope.

Just out of interest i signed up to unison.ie to see exactly what was said. In my opinion the quotes from Nout Wellink (Dutch Central Bank Govenor) are far far from a 'hint' about future rates.

He mentioned that rates are still "damn low" while inflation is still a concern but the "hint" about next year is that the desired neutral rate may be lower than in the past.

The journalist in question then goes on to state that 'most economists' reckon this neutral rate is between 3.5 and 4.25, i.e. 'Hey sure we're practically there already'.

Personally i would take Mr Wellink calling current rates "damn low" and raising ongoing concern about inflation as a hint that rates will continue up but then who am i?

(this is in no way an attack on Highflyer btw and thanks for pointing out the article)