Q: Have we any indication which way mortgage rates are going? I’m coming to the end of my fixed-rate term with my lender.
I’ll probably stay with them because I don’t want the hassle of changing and I imagine all lenders offer the same anyway. But should I lock myself into another fixed rate?
I’m a contract worker so my monthly income varies. Sometimes I’m flush, other times, not so much.
C Moran, Westmeath
A There are a few parts to your question that need to be considered. First, in relation to rate predictions, this is difficult and nobody can give you a definite answer.
Bank of Ireland recently increased its five- and 10-year fixed interest rates, so perhaps this is an indication that other banks might also look to increase longer-term fixed rates — but there are no certainties.
Rather than try to guess which way rates will go, base your decision on factors that could be considered sureties.
A fixed rate will give you the security of knowing exactly what you’ll need to put aside each month to cover your mortgage. This can be useful when budgeting, particularly when you don’t have a fixed income per month.
The downside is that you’ll be locked into the rate for an agreed period and won’t necessarily benefit from rate reductions.
If, in two years’ time, you find yourself in the position where you want to try to switch rates, your lender might charge a breakage fee. This should not put you off entirely, however, because it may still be lower than the savings you could make — and, in many cases, there are zero breakage fees anyway.
If you decide to fix, my advice would be to do so at the lowest rate and for the longest term possible. However, you should ensure that in doing this, you retain the flexibility to overpay on your mortgage, and that new-business interest rates are available to you when the fixed term matures.
One final point. You mention the “hassle” of changing lender. I would urge you to reconsider this approach, because while it may be the case that your current lender will continue to offer you the best value on the market, the potential for savings is greatly increased if you are open to reviewing the offerings of the other banks.
What’s more, though securing your mortgage may have felt like a huge ordeal at the time, switching to another lender is often far less painful.
You don’t have the hassle of selling an old house, or juggling the time between moving from a rented property and getting the keys to a new one.
Some banks require less documentation for a straight switch than they do for a new application, so check what other lenders are offering before you rule out switching.
Joey Sheahan is head of credit at MyMortgages.ie
Source: The Times https://www.thetimes.co.uk/edition/ireland/question-of-money-should-i-stick-with-my-fixed-rate-mortgage-b0h7dpgqq
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