WHEN FIXING MAKES NO SENSE
Existing 30-year mortgage of €250,000 at Permanent TSB: Pay €13,380 more by fixing
IMAGINE you've got €250,000 left to repay on your mortgage with the Permo and you intend to repay that over 30 years.
As you're on a standard variable mortgage, you're paying an interest rate of 3.69 per cent -- and your monthly repayments work out at about €1,150. You're considering fixing your mortgage in case the standard variable rate goes up again.
As you're an existing customer and you're borrowing more than half the value of your home, the best five-year fixed rate you can get from Permanent TSB is 5.75 per cent. Under that rate, your monthly repayments are €1,460 says Michael Dowling of the Independent Mortgage Advisers Federation.
Let's say the ECB rate increases by 1 per cent over the next 18 months, bringing your standard variable rate to 4.69 per cent. Despite this increase, you'd still pay €13,380 more for your mortgage over five years had you opted for the five-year fixed rate of 5.75 per cent instead of sticking with the standard variable rate, according to Dowling.
"The reason for this is that Permanent TSB have already increased their standard variable rate by 1 per cent [since July] and their fixed rates are so high," says Dowling.
In this case, it may make more sense to switch to a three- or five-year fixed rate with AIB.