Fixing your mortgage for more than a year or two is never an easy decision: longer than that and you risk serious interest rate penalties if you try to break the contract; there is also the chance that rates may fall soon after you have locked in at the higher price.
All the major lenders have stepped up their campaigns for borrowers to fix their mortgages for longer terms a sure sign that they expect rates to fall. Recent Central Bank pronouncements about delaying the inevitable for as long as possible suggest that Irish mortgage rates will not be coming down much before the end of the year, but after that they could be as low as 5.5 or 6 per cent, a clear 1 to 2 per cent lower than that which most Irish homeowners are currently paying (the average being 7 to 7.5 per cent APR).
First National Building Society, which is to change its name to First Active after its expected flotation on the Stock Exchange later this year, has brought out a five-year fixed rate of 7 per cent APR for customers borrowing less than 80 per cent of the value of the property, plus a 1 per cent discount for the first year. On a typical £50,000 loan, a mortgage with a 7 per cent APR fixed rate will cost £341.00 per month or £6.82 per £1,000 borrowed.
As part of the deal a voucher worth £150 is included that can be used at any ESB outlet against the purchase of certain kitchen appliances. The ESB offer is available to the first 1,000 customers who apply for the fixed rate before June 30th and who draw down their mortgage before the end of this year. The vouchers can be used up to March 31st, 1999.
The First National five-year fixed repayment rate is quite attractive, (slightly undercutting the AIB) but borrowers should note that the FNBS is not necessarily the most competitive lender overall for variable rates or other discounted rates. Given that a mortgage is a long-term product in which rates will go up and down, you need to keep a clear head and not be easily influenced by special marketing offers. Long-term fixed rates are suitable for people who want to plan their long-term budget and can live with the news, should it happen, that variable rates have fallen below their fixed one.
Irish interest rate fluctuations may be a thing of the past after EMU, but that does not mean that European rates will not fluctuate over any fixed mortgage period.
Some advisers are recommending that borrowers wait at least until the end of the year to see how far variable rates moved downwards, but they should also be prepared for the fact that longer term fixed-rate offers like this one may not be available then. Like everything, even peace of mind has its price.
