Following the first round of increases earlier this year, EBS announced a further increase of 0.6% on its Standard Variable Rate mortgage this month which was followed on Friday by Irish Life & Permanent with a 0.5% increase on their Standard Variable Rate; it is only a matter of time before all banks follow suit.
So the question holders of SVR mortgages are asking… should I fix?
Last January when banks show signs of imposing increases the same question was asked…to fix or not to fix? Locking into a fixed rate is unlikely to save you money, but it will definitely save you stress and worry over whether interest rates will rise or not. Liam Ferguson Financial Adviser said; “Obviously, fixed rates are dearer than current variable rates [but] you are paying a premium for the peace of mind that you’re buying”.
Fixed Rate Mortgages:
Pros
- Less stress and worry over rate increases
Cons
- Dearer than SVR
- Inflexible i.e. huge penalties (in some cases as high as €40,000) if you wish to break out of a fixed-rate mortgage to access lower rates
- Overpaying or clearing your mortgage with a lump sum is also not an option with fixed rate mortgages
Advice?
- Financial Adviser Liam Ferguson says he isn’t “a fan” of locking in for the long term with a fixed rate mortgage; “Nobody can accurately predict what way the ECB or banking rates will go over the next 10 years”. Fixed terms of between two and five years are the most popular.
However, even if you are considering switching…it might now not be possible! Some banks, like AIB no longer accept mortgage switches and other banks have imposed restrictions on switching.
Finally
- If you are consider a move between a SVR and Fixed, before you do anything ensure that you and/or your adviser establish that the amount you will save by making such a switch justifies the legal and valuation costs of doing so
- And for those who are lucky to have a tracker…KEEP IT!... Tracker mortgages follow the movements of the ECB rate (plus a margin), so borrowers with this type of home loan (which is no longer available on the market) don’t need to worry about what banks do to standard variable rates.
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