Update - this seems to be based on the assumption that the 2% cash back is only for fixed rate customers. - Brendan
"You should not take out a fixed rate mortgage " from the best buys page, I'm not sure how strong an argument it is? Isn't it just a gamble that variable rates will go way down? Whilst on the other side fixing with a cashback is a gamble they won't go "way down"? And reality is, no one knows which gamble is the most riskiest?
Say you fix now for 5 years with BOI for 250k mortgage @ 3.3% (say it's 80 LTV) over 30years. You get 2% cash back over the 5 years (on top of this you could put the 5k into the highest APR account for 5years, then switch to variable mortgage after 5 years and pay the (5k + interest ) off the mortgage).
By my quick calculations using the variable rates elsewhere would need to be to an average of 2.65% over the 5 years period for the BOI customer to lose out.
So in reality variable rates would need to go well below 2.65% for a large period of time to average out at 2.65% - rates aren't going to drop to 2.65% any time soon. For new lenders coming in we were hearing possibly 2.9%.
On the face of it, the blanket recommendation to not fix does not seem as convincing. Plus who can predict with any level of certainty where ECB rate will be in 3,4 or 5 years?
ECB rates have been 1% and below since 2009, that's 8 years now almost - will it last 13 years? The eurozone economy will surely recover at some point? So all we are doing in choosing between fixed\variable is gambling on when that point is? Or am I missing something?
"You should not take out a fixed rate mortgage " from the best buys page, I'm not sure how strong an argument it is? Isn't it just a gamble that variable rates will go way down? Whilst on the other side fixing with a cashback is a gamble they won't go "way down"? And reality is, no one knows which gamble is the most riskiest?
Say you fix now for 5 years with BOI for 250k mortgage @ 3.3% (say it's 80 LTV) over 30years. You get 2% cash back over the 5 years (on top of this you could put the 5k into the highest APR account for 5years, then switch to variable mortgage after 5 years and pay the (5k + interest ) off the mortgage).
By my quick calculations using the variable rates elsewhere would need to be to an average of 2.65% over the 5 years period for the BOI customer to lose out.
So in reality variable rates would need to go well below 2.65% for a large period of time to average out at 2.65% - rates aren't going to drop to 2.65% any time soon. For new lenders coming in we were hearing possibly 2.9%.
On the face of it, the blanket recommendation to not fix does not seem as convincing. Plus who can predict with any level of certainty where ECB rate will be in 3,4 or 5 years?
ECB rates have been 1% and below since 2009, that's 8 years now almost - will it last 13 years? The eurozone economy will surely recover at some point? So all we are doing in choosing between fixed\variable is gambling on when that point is? Or am I missing something?
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