Home Economics: answering your property questions
Personal Finance expert Sinead Ryan answers your property questions.
Q I have a rental property on a variable interest rate of 3.67pc with EBS. Should I fix it for five years at 3.8pc or hold off and see if their fixed rates fall this year? I hear rumblings of ECB interest rate rises.
A Your email didn't specify the terms of the mortgage, but generally speaking the decision to fix or not really depends on your future income situation. It's far too difficult to second guess the ECB, so put away the crystal ball. Fixing gives certainty to outgoings, but you run the risk of losing out if rates decrease. Given that they are historically low, the opposite is, as you say, more likely. However, the ECB "rumblings", are just that - meagre conjecture.
The ECB's only goal is to keep inflation at 2pc, one at which it has failed miserably, so although it may be under pressure to increase rates, it would be hard to do that in the short term. After that, they probably only have one way to go.
Karl Deeter from Irish Mortgage Brokers adds: "This is a relative rather than absolute choice, i.e. what are the options elsewhere and what is the price of doing nothing? If the price of doing nothing is that you pay, say, €1,000 per month, then the price of fixing is going to be €1,015 because a 0.13pc increase will be a fairly minor sum which you undertake in order to fix your price for the next five years.
"You could consider the effect of a rate hike which, if it comes, will probably be in the order of 0.25pc. So we are boiling down to paying 0.13pc more today to protect yourself from a potential 0.25pc or more in the next five years - you'll have to make a value and judgement call on that. My personal choice would be to take the fixed rate."
My own view is that a rate of 3.67pc for a buy to let is very good value, as is a fix at 3.8pc and I wouldn't look a gift horse in the mouth. If you are on a fixed income from the rent, or a tight budget otherwise, it might suit you to fix, as long as you don't plan on selling up within the period as you'll incur penalties.
Q My boyfriend and I have just purchased our first home - and we are a bit overwhelmed about the amount of admin we have to get through for life insurance. One of the conditions of our mortgage is that we have to have mortgage protection. I'm not sure if we are required to get this with the bank with which we took out the mortgage or can we go elsewhere? From what I can see, our bank is pretty expensive. Also I don't really know what type of cover we need - what's the difference between Joint Life or Dual Life and which would be best for us - we are 28 and 29 and not married.
A Artur Janicki, Senior Financial Advisor with Clear Financial, says: "A common mistake people in your position make is believing that taking out the cover with their bank is a pre-requisite of getting the mortgage with that same bank - this is absolutely not the case. While you must put life cover in place, you are free to buy a policy from whomever you choose.
"As a general rule of thumb, if the premium for Dual Life cover is the same as that for Joint Life cover, it would definitely be better for you to affect Dual Life Mortgage Protection.
"Joint Life is an either/or claim, so only pays out once on the death of either person, clearing off the mortgage. But Dual Life does this and maintains life cover in place for the other person. Another point to note here is that because you are not married, you should seek professional advice with regard to Inheritance Tax rules - you are considered 'strangers' in the eye of the law and this has a financial impact. Drafting a will is also a must."
The Ryan Review
Coming firmly under the heading of 'What Did They Think Would Happen?' is the news that following the introduction of rent controls in zoned hot spots (which were themselves a political football between Fianna Fail and Fine Gael), it turns out that non-rent pressure zones are now coming, eh, under rent pressure.
The Institute of Professional Auctioneers & Valuers (IPAV) is calling for equity in the system. Some less charitable would call for a scrapping of the system altogether.
Although only introduced in December, the fledgling Rent Pressure Zones data covers 26,276 new tenancies.
Landlords who decided a good tenant was worth more than a rent increase are now being punished. Those outside the RPZs are already locking in rent increases in case they get hauled suddenly into the political loop.
Certainly, as time goes on, it will be worth examining the rent increases that will be notified to the Residential Tenancies Board. Landlords must give 90 days' notice of an increase, so we won't see meaningful figures for a couple of months, but estate agents, who handle much of the letting market, are already flagging hikes.
Rent controls often have the opposite of their intended effect but the Government, caught between a rock and a hard place, now seems to have breached the Law of Unintended Consequences.