Which to choose ICS rates 5 years fixed 3.69 % vs ICS Variable 2.7 %

S

stephinireland

Registered User
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hello everyone ,
we're first time buyers and trying to understand fixed rates vs variable rates ,
We have an AIP letter from ICS and at the time of the letter , it indicated the 5 year fixed rate would be 2.5 % interest
which seemed like a good enough option at the time ,
fast forward 3 months and it is now gone up dramatically to 3.69 % , which now seems to be one of the worst fixed rate options
currently avcailable ,
The repayment on this rate would be approx 1550 per month
on the other hand the variable rate would come out about 200 cheaper initially ,
We understand there are risks with the variable option , but how much of a risk it actually would be ?
We also understand there are far more flexibility with a variable home loan , with far less penalties if overpaying and
more money being paid in the principal part of the loan ,as well as far less hassle when switching ,
We don't really mind if repayment aren't always the same every month if we can in exchange get the flexibility ,
But in the current climate , would it be a reasonable choice , is there any chance my payment would ballon up to
2000 + a month or is it unlikely ,
 
You should go with a different lender if you can. There are much cheaper rates out there

If you have to go with ics for some reason (perhaps you are sale ageed and need to draw down funds asap) i would go with the variable and switch lenders as soon as you can.
 
stephinireland said:
We also understand there are far more flexibility with a variable home loan , with far less penalties if overpaying and
more money being paid in the principal part of the loan ,as well as far less hassle when switching ,
Click to expand...
This really isn't true. Some lenders (Avant and Finance Ireland, and AIB's "green" rate) allow you to make very large overpayments without penalty.

All of Avant's rates, and Finance Ireland's 10-year and longer fixed rates, allow you to avoid any potential break fee if you move home in the future (as long as you take out a new mortgage with them, and subject to certain conditions). And in the case of Finance Ireland you can "take your mortgage with you" – meaning that you get to keep the same interest rate when you move (again, subject to certain conditions).

And even if you don't take out a new mortgage with them, those two lenders will put a cap on any break fee that you may have to pay when you move.

And break fees can sometimes be low or even zero anyway – it all depends on how interbank interest rates change over time.

There is very little sense in taking out a variable-rate mortgage in Ireland today. And yes, ICS's rates could go much higher.

You should apply to several lenders for Approval in Principle – Avant, AIB and Finance Ireland being good choices. If you think you might end up buying a property with a Building Energy Rating (BER) of B3 or higher, apply to Haven and AIB too so that you can avail of their "green" rates. Read these two threads:

Best Buy - Which lenders have the lowest mortgage rates? (Updated April 2023)

While I wrote the original post on this, Paul F has edited it and made it far easier to read and has kept it updated. Brendan You (or your broker) should apply to two or three of the cheapest lenders simultaneously. It might take some time for your loan offer to materialise, and today's Best...
www.askaboutmoney.com

Key Post - First Time Buyer mortgage guide

Some tips and Frequently Asked Questions when applying for a mortgage as a first-time buyer (FTB)... Start by getting mortgage approval from the lender you bank with If you have your current account with Bank of Ireland, then apply directly to them for a mortgage. Assuming you have a good...
www.askaboutmoney.com

If all you have from ICS is Approval in Principle, there is still a long way to go. As @Dazzler123 says, the only reason to stick with ICS is if you are sale agreed on a property and you think you are close to getting a full loan offer from them.
 
Thanks for all the replies , much appreciated,
Unfortunately all we have is the ICS AIP at the moment, and we need to drawdown asap as we are sale agreed , we would rather drawdown now than having to restart the process all over again .
Seller will definitely not wait around for us .
With this in mind , we have to go with Ics ,
How bad would you say a variable rate could actually get ?
 
stephinireland said:
Thanks for all the replies , much appreciated,
Unfortunately all we have is the ICS AIP at the moment, and we need to drawdown asap as we are sale agreed , we would rather drawdown now than having to restart the process all over again .
Seller will definitely not wait around for us .
With this in mind , we have to go with Ics ,
How bad would you say a variable rate could actually get ?
Click to expand...
If fixed rates are gone up that much, just think what variables can do. If you have to stay with ICS or lose the house, go variable with ICS and start switching straight away. You'll get suckered for solicitors fees to move (1200-1500), but monthly savings on a fixed with Avant or FI would be a couple of hundred I imagine.

Obviously the best option is to get AIP with someone else (AIP can be gotten quickly enough if you have all your documents together) and save loads.

Either tell the seller and hope they hang around, or don't tell them and do as I say above with Avant and FI. If the seller asks what's going on, tell them the bank has a slow turnaround on loan offers. AIP to full loan takes weeks. For us AIP took a month from first contact. AIP to full loan offer was another month. Then 2 more months to get our mortgage switched/solicitors side of things complete. So basically, starting again adds 1 month to a 3-4 month long process.
 
My first thought is not about the rate but about what you can afford to pay. Is €1,550/2k a small chunk of change? While you want to get the best rate available you don't want to risk getting into arrears with future payments.

The more sensitive that you are to higher mortgage repayments the better off you'll be locking in a (admittedly higher) fixed rate. It would provide certainly/peace of mind.

Something to consider is that switching could take 6 months. If you've an existing mortgage a new lender won't touch you until they see a track record of repayments. Their rates could all move between now and then. In saying all that it cant hurt to start the process of getting loan approval now.

You ask could it hit €2K a month. Really depends on how much you're borrowing. I'm guessing at your borrowings so could be way off but based on the info provided I'd say you're looking at a mortgage of €365k over 35 years... Assuming I'm anywhere near right the variable rate would have to go up to 5.65%. That's roughly a 2% increase over where it is now.

How likely is ICS to increase their variable rate to such levels? The simple answer is no one knows. They have been quick to raise fixed rates but that may reflect developments in that part of financial markets. Variable rates are closer aligned to actual ECB rates whereas fixed rates are more heavily influenced by market expectations of where the ECB rate will be in 3/5/10 years etc.

In terms of where the ECB rate (and possibly variable rates) might be, we could easily see half the increase needed by the end of the year, if forecasts are to be believed.

www.rte.ie

ECB to raise deposit rate to 0.75% by year-end - poll

The European Central Bank will raise its deposit rate above zero for the first time in a decade in September, according to most economists polled by Reuters, who expect it to be at least 50 basis points higher than previously anticipated by year-end.
www.rte.ie www.rte.ie
 
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@stephinireland You have got AIP from ICS. But what other steps have you completed?
  • Have you provided bank statements, payslips, salary cert from your employers, etc., to ICS?
  • Have you found a solicitor?
  • Has the solicitor requested the title deeds and reviewed the title?
  • Have you organised a survey of the property?
  • Have you had the property valued by ICS?
  • Have you organised mortgage protection insurance and home insurance?
I'm trying to get a picture of how far along in the process you are with ICS. If you have got AIP but not completed most of the other steps, you might as well apply to other lenders for AIP.
 
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Hi Paul ,
Yes we have the solicitor sorted and he’s now working on getting contracts , engineering report done ,sale agreed, valuation completed last week, waiting on the result of valuation , now meeting with broker next week to sort out insurances and decide on the rate , so it’s a case where we are deep in the process ,
It’s been such a stressfull journey so far being constantly outbid , getting in almighty bidding wars etc…
I’m afraid we just couldn’t bear having to delay everything now , it might cost us initially but what if other lenders start raising fixed rates , we could loose the house and have no better rates in the end.
 
@stephinireland I understand – sticking with ICS (for now) looks like the only choice.

Leaving aside the question of fixed versus variable with ICS, soon after you get the keys (nearly there!) and catch your breath, you should apply for approval in principle (as a switcher) to Finance Ireland, AIB and Haven.
  • There is no point in applying to Avant because they won't let you switch until you have been with ICS for at least 12 months
  • In the case of AIB it is 6 months
  • In the case of Haven, their rule is unknown
  • In the case of Finance Ireland you can apparently switch to them immediately, but I wouldn't be surprised if they wanted to see six months of mortgage repayments first
There is another consideration that might rule out switching to Finance Ireland (for now): you must have a loan-to-value (LTV) ratio of 80% or lower. When the valuation from ICS comes in, you will know if you are anywhere close to that. Rising property values and/or a lump sum overpayment could get you there.

Anyway, get the house first and set yourself a reminder to come back to this thread :)

If you decide to go for a fixed rate with ICS, you can get a slightly better interest rate if you sneak into the <80% LTV bracket.
 
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