Variable rate 4.3%, should I fix?
- Thread starter Tomo225
- Start date
Hello,
In isolation, I look into my crystal ball and see that rate as being too high, for the next 4 year period. My view is that interest rates will stay low for the next couple / few years and I believe that downwards pressure on homeloan rates across the competitive lenders, will drive the fixed rates lower over the next 12-18 months.
Obviously, this is not financial advice and is no more than my own personal opinion based on what I see, late at night, while looking into my own crystal ball (complete with unreliable broadband, clouds covering 67% of the moon, a dog in the room etc. etc.
)
It is extremely important to note that I am on a tracker mortgage, so my view of homeloan lending rates will be influenced by that. If you are on a Standard Variable Rate loan, your view may be very different with regards to the fixed rate on offer.
Furthermore, it would be helpful if you could tell us if you have a perfect repayment record, have the means to qualify for a new homeloan for the same amount with another lender and if you would be eligible to refinance your mortgage under normal terms (i.e. no complex legal work etc.)
In isolation, I look into my crystal ball and see that rate as being too high, for the next 4 year period. My view is that interest rates will stay low for the next couple / few years and I believe that downwards pressure on homeloan rates across the competitive lenders, will drive the fixed rates lower over the next 12-18 months.
Obviously, this is not financial advice and is no more than my own personal opinion based on what I see, late at night, while looking into my own crystal ball (complete with unreliable broadband, clouds covering 67% of the moon, a dog in the room etc. etc.
)It is extremely important to note that I am on a tracker mortgage, so my view of homeloan lending rates will be influenced by that. If you are on a Standard Variable Rate loan, your view may be very different with regards to the fixed rate on offer.
Furthermore, it would be helpful if you could tell us if you have a perfect repayment record, have the means to qualify for a new homeloan for the same amount with another lender and if you would be eligible to refinance your mortgage under normal terms (i.e. no complex legal work etc.)
gnf_ireland
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@Tomo255
From my quick calculation you are paying roughly 1390 euro a month for your mortgage at the moment @ 4.3%
Bringing this down to 3% would mean you pay roughly 1210 euro a month - a saving of 180 a month or 2160 euro a year
So the simple answer is you need to do something.
I don't believe we will ever get to european interest rates in Ireland as there are too many vested interests and interference.
So its really up to you. If you were to get your rate down to 2.5% in the future, it would reduce your repayments to 1145 euro (a further saving of 65 euro a month), but who knows how long that would/could take to happen. Every month that goes by now is costing you 180 euro.
It also depends on the amount of time you have available to switch the mortgage. If you are time constrained at the moment, then sticking with Ulster Bank may be the issue. Switching a mortgage does not take a massive amount of effort (normally) but it does sometimes time a long duration and can be a slow enough process. Fixing with Ulster Bank would be relatively quickly and potentially done for 1st January
From my quick calculation you are paying roughly 1390 euro a month for your mortgage at the moment @ 4.3%
Bringing this down to 3% would mean you pay roughly 1210 euro a month - a saving of 180 a month or 2160 euro a year
So the simple answer is you need to do something.
- Your choice is fix with Ulster Bank - easiest choice as you only have to do a valuation and fill in a form
- Switch to another bank onto a variable rate - this is equivalent to getting a new mortgage so you need to ensure you will qualify based on your situation, payment record etc. The leading contenders here are probably AIB or EBS
- Switch to another bank onto a fixed rate - same as above. This would include BOI with the 3% cashback option or maybe even KBC with their 10 year fixed mortgage
I don't believe we will ever get to european interest rates in Ireland as there are too many vested interests and interference.
So its really up to you. If you were to get your rate down to 2.5% in the future, it would reduce your repayments to 1145 euro (a further saving of 65 euro a month), but who knows how long that would/could take to happen. Every month that goes by now is costing you 180 euro.
It also depends on the amount of time you have available to switch the mortgage. If you are time constrained at the moment, then sticking with Ulster Bank may be the issue. Switching a mortgage does not take a massive amount of effort (normally) but it does sometimes time a long duration and can be a slow enough process. Fixing with Ulster Bank would be relatively quickly and potentially done for 1st January
A fourth option is to get your wages paid into an Ulster Bank Current Account and pay your mortgage from there.
That would give you a 3.5% interest rate.
http://digital.ulsterbank.ie/personal/mortgages/mortgage-rates.html
It is a little bit of work to do but easier than switching.
But if I was in your shoes I'd investigate how much it would cost if you break out of your fixed rate. Then if that cost is low, fix at 2.99%.
If rates go up you're grand and if rates go down you can calculate if the rate saving is more than the break fee.
That would give you a 3.5% interest rate.
http://digital.ulsterbank.ie/personal/mortgages/mortgage-rates.html
It is a little bit of work to do but easier than switching.
But if I was in your shoes I'd investigate how much it would cost if you break out of your fixed rate. Then if that cost is low, fix at 2.99%.
If rates go up you're grand and if rates go down you can calculate if the rate saving is more than the break fee.
Agree with the comments above, just I would simplify the way you calculate the amount a lower rate saves you. It's simply 255k*(4.3%-3%), or roughly 3,315 per year. At lower interest rates you repay capital faster on an annuity so the difference of 1k is reducing your balance.
I think we will see further rate pressure in the new year as banks compete to hold market share (they're all aiming to lend more money than is being repaid in their existing mortgages), but when and how much is anyone's guess. Rates would need to drop to 2.5% within 12 months for it to be more worthwhile to wait and fix later.
I'm sure you've had a look at the posts re breakage fees?
Either way you can't afford to do nothing.
If you don't want to fix right now, take a look at UB loyalty rates if it suits you to move your current account there. I think you are eligible for the loyalty plus rate of 3.5% (I'm not familiar with the process fir existing customers so maybe someone else can confirm).
Edit: my post crossed with @qwerty5
I didn't mean to repeat their great advice!
I think we will see further rate pressure in the new year as banks compete to hold market share (they're all aiming to lend more money than is being repaid in their existing mortgages), but when and how much is anyone's guess. Rates would need to drop to 2.5% within 12 months for it to be more worthwhile to wait and fix later.
I'm sure you've had a look at the posts re breakage fees?
Either way you can't afford to do nothing.
If you don't want to fix right now, take a look at UB loyalty rates if it suits you to move your current account there. I think you are eligible for the loyalty plus rate of 3.5% (I'm not familiar with the process fir existing customers so maybe someone else can confirm).
Edit: my post crossed with @qwerty5
I didn't mean to repeat their great advice!
Ulster Bank are great. All you need to do is ring the mortgage team, give them your mortgage number and ask for a rate sheet. This will take about a week & a half to get to you.
Look at the rates on the sheet that you are applicable for and tick the one you want.
If you're applicable for it then they'll send you another letter in a couple of weeks saying you're on the new rate. No messing about.
If you can get your house valued at €320k, or pay circa €15k lump sum off your mortgage, your LTV will drop below 80% and this will give you more options. The variable Loyalty Plus rate would drop further from 3.5% to 3.1% or you could fix for 3 years at 2.85%. Failing that the 4 year fixed at 2.99% looks very attractive when you're paying 4.3%.
That's a great point.
If the €300K valuation was a couple of years ago then tick the 3.1% in the Ulster Bank rate sheet. They will use some data they have to guesstimate the value of the property. If they value it at more than €319000 then you're in the <80% LTV and can choose 3.1% variable.
I did this recently. They don't require you to get a valuation so it's free. If they value it at less than €319000 though and you disagree then you do need a valuation which will cost a few quid.
My actual process was similar, I did it a couple of months ago.
They valued it at X. This gave me a LTV of 61%. I rang them and asked them what valuation they gave me. They told me. So I overpaid by Y to get a LTV of 59.something.
Then I asked for the rate sheet again and chose the rate for <60% LTV and got it.
Overpaying might not be an option for you but the point is they have no resistance to you doing this and are helpful.
Thanks for ur response, I'm on a variable rate 4.3% so I don't have to worry about breakage fees, i have never missed a payment, I also feel that d fixed rates will come down next year, but I'm still going to be paying 180 euro a month extra if I try hold out for better rates. I have just opened up a current account with ulster bank to get things moving , i am I entitled to a lower variable rate now that I have the account with them?
Yes, but you have to ask for it.
newirishman
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A bloody disgrace? A bit harsh methinks.
How exactly should they know if they have more suitable rates? Should they for example do a full analysis if your property has increased or decreased in value as to assess the LTV as well? Or just assume?
What if 5 years down the line you think you could have saved a few quid by for example not fixing, but the bank put you on a fixed rate at the time as this might have been "more suitable"?
Would be great if people take some responsibility for their financial affairs. It's not like it is that onerous to occasionally look at their website to see if there's new rates available.
Why do you want cash back? If you do fix I suggest you pay the same amount as you are currently at as it seems affordable to you and will bring down your mortgage term. What age bracket are you?
Ulster Bank allow overpayments of 10% of balance each year, without calculating if a break fee applies. It's best to confirm this though as there was a different condition for a while on the 4 year product when it initially launched.
I focused on the fixing part of your post.
If you wanted to switch you'd really only be doing it for the cash back at your LTV. So it'd be BoI or EBS which both have terrible variable rates, so you'd be fixing. In that case BoI would be 3% for a choice of terms from 1 to 5 years.
There isn't much hassle if you've a straight forward case and credit history, but it does take time. You pay a valuer, and a solicitor, but your cash back will be more than that.
I focused on the fixing part of your post.
If you wanted to switch you'd really only be doing it for the cash back at your LTV. So it'd be BoI or EBS which both have terrible variable rates, so you'd be fixing. In that case BoI would be 3% for a choice of terms from 1 to 5 years.
There isn't much hassle if you've a straight forward case and credit history, but it does take time. You pay a valuer, and a solicitor, but your cash back will be more than that.
Could I tick the option for for the lower rate of 3.1% LTV of 80% , the 300k valuation was from a local estate agent but she did say I would probably get more, that was a good few months ago, or should I get 1 or 2 more valuation s from different estate agents . can't really afford to pay 15k of d mortgage to get down to golden LTV 80%.
Tick the box first and send in the form. If you aren't at an LTV <80% according to their valuation they'll just refuse the reduction.
Then you can ring them and ask them how much they think your property is worth. In my case above they valued my property at x which was 61% and a small overpayment was all I needed to get down below 60%. So I did the overpayment and then I asked for the rate sheet again and chose the same option and got it. No valuation was required at my end.
If you are getting a valuation from an estate agent I'd ask Ulster Bank who they take valuations from. I don't think they they have a list of agents that they trust.