Where to keep money safe to pay off mortgage?

C

cologneboy

Registered User
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Hello there,

I'm in the luxurious position to have saved the money I owe to my mortgage provider, NIB .5 + ECB. I'm in no hurry to repay this at present as I'm earning more on interest. ie An Post saving certificates. My question is: Would this be safe to continue given the current unpredictability in respect of currencies? I assume, at present I owe NIB x-amount of € and I've saved x-amount of €. What ever may happen to the Euro, it would translate both my borrowings as well as my savings into what ever new currency? I might end up x-amount of 'bananas' but at the same time my savings would have translated into 'bananas' as well.
Any comments, observations?

Thanks,

cologneboy
 
Wow. You are assuming and imagining a whole heap of pain that is unlikely to happen. Setting aside a huge seperate debate, it is unlikely that the euro is going to go belly-up. Therefore you are worrying somewhat unnecessarily.

If you have money in An Post savings certificates then they are safe as the State itself. However if you think the euro is going to fail...
 
cologneboy said:
I might end up x-amount of 'bananas' but at the same time my savings would have translated into 'bananas' as well.
Click to expand...

Your logic seems correct, so on that basis there may not be too much to worry about, but somebody else may spot another angle on this.

I don't think the comment about the Euro being "unlikely to go belly-up" was very helpful. It's a real fear for many people.
 
SPC100,

let me know should you suffer a brain wave.
I'm getting increasingly suspicious. I follow a German forum, cashkurs.com, initiated by Dirk Mueller, in Germany known as Mr Dax. The forum is clear the a second deflationary shock is imminent,probably started already, followed by re-negotiation of debt. I'm seriously considering at this stage to pay of my mortgage resulting in me right out owning a real asset, no debt.
What do you think?

cologneboy
 
I am with AIB at ECB+.6, I was wondering if they would settle for 80% of outstanding mortgage ;-)
 
I guess you could protect against the two risks below by putting some funds on deposit in germany or france.

1) the state leaving the euro, your loan staying in euro, and your new bananas on deposit rapidly devaluing - assuming that the new bananas would indeed devalue
2) the state going bust and not paying back certificates
 
The question to ask is whether the return on the savings is worth the risk of something major happening whereby you still owe your mortgage, but have effectively lost your savings. I have a feeling that something big will happen in the near future. Maybe Germany pulling out of the Euro, or Ireland defaulting. I'm of course just guessing.

Times are very uncertain, and I'd be inclined to just pay off the mortgage. At least hedge your bets and pay some of it off.

(you borrowed in Euros, but your savings may turn into bananas. At least you can eat bananas.)
 
I'm on the same deal as the OP and doing exactly the same thing - but use 1 yr. fixed savings accounts for the savings rather than throwing them at the mortgage. Surely if theres an issue with the savings, theres an issue with the mortgage too...so worst case scenario, they are both transferred to the new currency (should it happen) so still better off than paying directly in to mortgage now due to differential between mortgage rate and savings rate??

I'm half way through my one year fixed's with Anglo and this thread makes me wonder what the best option would be when they mature. The other thing I was wondering about - is the bank guarantee. When does that expire and is it wise to remove funds from Anglo before that? I did hear something along the lines that closing it down might be a real option after all??
 
so worst case scenario, they are both transferred to the new currency
Click to expand...
Worse case scenario is that you lose all your savings because the bank guarantee doesn't work. You still owe the mortgage (in Euros).

Second worse is that you borrowed in Euros but your savings get converted into worthless Lenny pennies. Your mortgage is still in euros.
 
I'm interested in all these reports that if you are on a tracker mortgage with low interest rates then rather then overpaying you're better to lodge money in high interest account. But when I go to do the figures on my account the argument doesn't seem to hold up!
I'm on a tracker of ECB+.95%.
Taking into account tax relief when I tot up how much I'm saving annually by overpaying my mortgage it always comes out at 3.85%. I know it's hard to understand but I'm certain that I'm calculating right and I have the hard facts to prove it since I recently overpaid by a lump sum and compare payments before and after the fact and it comes out the same. Anyone else see this anomaly?
 
umop3p!sdn said:
Worse case scenario is that you lose all your savings because the bank guarantee doesn't work.
Click to expand...
hmm..no one was talking about that scenario when I switched my 1 year fixed accounts to anglo. Not sure what to think on that one ..

umop3p!sdn said:
Second worse is that you borrowed in Euros but your savings get converted into worthless Lenny pennies. Your mortgage is still in euros.
Click to expand...
Your kidding right? I'm finding it hard to work out how that could be a logical scenario. Surely if deposits held in the country are converted to Lenny Penneys, then so too are borrowings?

@Grindle: what savings rate were you basing that on?
 
Your kidding right? I'm finding it hard to work out how that could be a logical scenario. Surely if deposits held in the country are converted to Lenny Penneys, then so too are borrowings?
Click to expand...
The government has guaranteed the deposits. If for some reason Ireland is no longer in the Euro, then a likely scenario is that the deposits get converted, overnight to Lenny pennies.
The banks, however, borrowed in Euros, so this is what has to be paid back.

I'm just guessing here but if everything goes belly up, I wouldn't rule out a worse case scenario for the lowly citizens. We would probably have more immediate concerns if this were to happen.
 
I'm just quoting what return I'm getting on overpaying my mortgage and it's 3.85 % eventhough my mortage rate is 1.95% APR.
 
Are people not mixing the "rules" of soverign debt with personal debt and coming up with some odd conclusions?

For example, in the case of Greek Bonds a French bank buys 1 Billion worth of Euro bonds, expecting a return after 5 years of 10%. They expect, after 5 years, to get back 1.1B euro. If Greece restructures or defaults, whatever happens, the bank expects to get back 1.1B euro, not 1.1BN drachmas.

For a mortgage, you bought your house for 300K euro. The bank loans YOU 300K euro. It all happened within the State of Ireland. How the bank funds that loan (through deposits, reserves and borrowing from other banks) doesn't matter to the man on the street.

I can't image a bank can declare that you owe it in a currency that is not the soverign currency anymore than it can suddently decide that it wants to be paid back in US Dollars because it wants to take advantage of changes in exchange rates.

I know there isn't a lot of trust out there for banks but seriously...if this were to happen I think people would just stop paying their mortages en masse.
 
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Thanks a lot for posing the question in a clearer light, that was very helpful.

I do fear something large will happen in Euroland.

I do have the funds split between several irish bank accounts, so hopefully a total wipeout of savings would not occur.

I am more and more enamoured with the idea of finding some (German) banks on the continent to place some deposits with.

I'm paying mortg at about 1.6% and gaining after tax deposits at about 2.8. so my "spread" is about 1.2% p.a.

The other advantage of keeping cash, is that one has opportunities, to invest in business, invest in training, buy property at some date etc.,

Paying off the mortgage removes some flexibility.
 
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