Beat the banks: lock in now or pay for it
With mortgage rates set to rise by 1.5pc this year, homeowners who can lock in to a rate of 4pc or less are being urged to do so before it's too late, writes Charlie Weston
IF you are thinking about fixing your mortgage, then act now. Unless you are tied into a fixed-rate mortgage or are lucky enough to have a tracker, then you have just days to grab the last of the good value fixed rates.
Anyone who can lock in to a rate of less than 4pc should sign up now, mortgage experts advise.
This is because Bank of Ireland is to raise mortgage rates this week, in a move that will hit thousands of homeowners.
The bank, which has 199,000 mortgages in this country, is set to follow the lead of Permanent TSB and AIB by hiking the rate it charges its current customers who have standard-variable-rate mortgages.
It is also understood that the bank will push up its fixed rates.
Rates are set to rise by 0.5pc, a move that will cost a homeowner with a €250,000 mortgage an extra €65 a month.
This is set to be swiftly followed by EBS Building Society and its broker-focused operation Haven.
After the move by AIB last week to increase its standard-variable and fixed rates by up to 0.5pc, Bank of Ireland has emerged as the best value provider of standard-variable and five-year fixed rates.
Bank of Ireland currently has the best value standard-variable rate at 2.3pc for those who are borrowing less than half the value of their home.
For those borrowing between 50pc and 80pc of the value of the property the rate is 2.4pc, according to Dublin-based Michael Dowling Mortgages.
Last week AIB increased all of its fixed, standard-variable and loan-to-value mortgage rates.
And this newspaper revealed that it plans two more rate rises to take fixed and standard rates up by 1.5pc overall this year.
Now mortgage brokers are warning those who do not have the protection of being on a tracker or a fixed rate that they have just days to lock into a good value fixed rate.
Some 300,000 homeowners have standard-variable-rate mortgages. Those coming to the end of fixed-rate deals will also be hit by rising mortgage costs.
If all lenders follow the lead of AIB and push up their rates by 1.5pc over the year then a family with a €250,000 mortgage would see their monthly repayments rise by €200, according to director of the Irish Mortgage Corporation Frank Conway. Mr Conway said anyone who could get a fixed rate of 4pc or less should grab it now.
The revelations that AIB was preparing to hit its existing mortgage holders with a series of rises meant the new benchmark had moved to 4pc.
"If you have a limited capacity to absorb rate rises then you should fix. If you are afraid your payments will go up by €200 or €300 a month then move now," Mr Conway said.
He recommended consumers opt for three or five-year rates.
"If you cannot get a fixed rate at 4pc or less then I think maybe you should take a risk and ride it out on a standard variable rate because switching is not an option for most," he added.
Michael Dowling of the Irish Mortgage Advisers Federation said the switcher market was effectively closed off to most people, with only KBC Homeloans and EBS/Haven mortgages prepared to take on switchers.
But people in negative equity were trapped with their existing lenders.
Mr Dowling added that many lenders charge their existing customers more than new customers for fixing their mortgages.
"We know that (standard-variable) rates are going to rise by 1.5pc over the next six to 12 months, ignoring any European Central Bank rise, so a fixed rate of 4pc should be looked at," Mr Dowling stressed. He predicted that standard-variable rates will hit 5pc in the next 12 to 15 months.
Base rates in the UK are just 0.5pc but a quarter of all lenders there are charging 5pc or more on mortgages, he added.
People with a tracker should not give that up, Mr Dowling stressed.
Those who can switch can get a three-year fixed rate of 3.69pc with KBC Homeloans. Haven has a three-year deal of 3.54pc, but EBS's fixed rates for longer than two years are more than 4pc.
If you are in negative equity you will not be able to switch and will have to look to your own lender to see what fixed rate they offer. The following lenders have fixed rates of less than 4pc (either three, four or five years): Bank of Ireland, AIB, Haven, ICS, Irish Nationwide and KBC, says Mr Dowling.
These lenders have fixed rates (of more than three years) that are higher than 4pc: Permanent TSB, EBS, National Irish Bank, Ulster Bank, Halifax and Bank of Scotland (Ireland).