Is it too late to switch my tracker mortgage
to a fixed rate?
I HAVE a tracker mortgage and while it has been great for a few years, I’ve had six increases since July. How bad could it get and is it late to switch my Tracker Rate?
While ECB interest rates have risen from 0 per cent in July to 3.5 per cent in March, they look set to increase even more over the coming months, with thousands of homeowners wondering if they should make a move.
Everybody’s situation is different, and it depends on your personal circumstances and your ability to repay and service debt, but it is obviously attractive to look at fixing. Our blogs in September 2022 and last January predicted these rises and explored your options in more detail.
What’s also important is the margin above ECB at which your tracker is pegged. Generally, the margin on the market when trackers were offered ranged from about 0.5 per cent at up to 1.45 per cent, with an average of about 1.1 per cent. At that average rate, it has pushed your loan interest rate on such mortgages to 4.6 per cent today – a significant increase from 1.1 per cent this time last year.
Some low fixed rates are still available, but may soon disappear. The lowest available fixed rate at this time is a 5yr fixed rate of 3.65 per cent (APR. 3.65 per cent). Mortgage holders on the average tracker rate, of ECB+1.1 per cent, will have seen the interest rate applied to their borrowings rocket from just 1.1 per cent last year to 4.6 per cent today. This means repayments on a €100,000 mortgage over 20 years have jumped from €419 to €606, or by €187 a month. Tracker customers opting for these rates, who typically have another 15 years on their loans, could save an average of €8,600 to the end of the term of the mortgage by opting for these fixed rates. Should interest rates continue to rise, as has been signalled by the European Central Bank, these repayments could be even higher.
However, if you’re in a 20-year mortgage giving it up for a three or five-year fixed rate, it doesn’t necessarily make sense unless you’re under severe financial pressure. You might have a short-term gain, but then you’re at the mercy of whatever lenders are charging at the time. It’s important to get advice and choose the right rate for you.
Talk to your financial broker for more information.
This article aims to give information, not advice. Always do your own research and/or seek out advice from a Financial Broker before acting on anything contained in this article.