With the breaking fee calculation changes, how long should I fix for?

[digweed]

Hi All,
I'm currently on a variable rate with my bank and I'm in the process of gathering information on switching. There are a number of options I'm considering but it looks like KBC is a good option with their fixed rates and €3000 cashback. The question I have is, how long should I fix for?


On the face of it, there's a lot of news about ECB raising their interest rates in the next 18 months and they can only go up. In addition, I've seen the changes to the way the banks now have to calculate the fees for breaking a fixed rate, so that might be option should I wish to move at some time during a fixed term. Therefore, the 10 year fixed @2.99% sounds like a good option. Am I wrong?

On the other hand, I've seen posts from Brendan B and others advising to fix for 1 or 2 years and see what options are available then. My fear is that ECB rates will already have started moving up by then and I will have lost out on the 'low rates', e.g. 2.99% fixed rate KBC is currently offering. I've also seen posts suggesting that banks here will continue to lower their interest rates as they're too high relative to the rates they can borrow from the ECB. A little confused to say the least.

Any advice on this would be great.

Thanks,

digweed

 

[RedOnion]

The way I look at these things is the wholesale interbank markets are much better at predicting interest rates than I, or any other poster here.

So, at the moment, 10 year funds cost about 0.8%. on the other hand up to 2 years is at a slightly negative rate. So effectively KBC are making less profit on their 10 year rate than their short term rates.

You could wait it out and see if banks narrow their margins further. But we've been waiting for a while. Any further reduction I think will be at the expense of removing cash back deals. Plus there is a market expectation of a rate increase in 2 years.

Personally, if I thought I was going to have a mortgage for 10 years, I'd be jumping at the fixed rate option.

I think KBC allow you to over pay a certain amount each year before calculating a break fee which will allow you some flexibility even if market rates don't change.

 

[Ndiddy]

Just called KBC, you can pay 10% of the original debt over the fixed term of your mortgage.