Fixing mortgages can be hazardous
Those who fixed this time last year are paying roughly €638 a month on a two-year fixed mortgage at 4.59%.
When the new rate changes work their way through the system, those on fixed rates will be paying nearly 30 per month more than those on variable rates.
However, those on variable rates at present are paying slightly more than those who fixed this time last year, said Sarah Wellband, senior executive with Rea Mortgage Services in Dublin.
A two-year fixed rate on a €100,000 mortgage at 4.59% is currently costing 638 a month to service.
By contrast, the average variable rate of 4.74% would cost slightly more to fund at 646 per month to finance, so there is no great advantage either way at present.
With the anticipated cut in mortgage rates, the cost of a variable loan at 4.27% would work out substantially cheaper at about 611 compared with the two-year fixed rate that still has another year to run.
To fix or not to fix is always a tricky issue, said Ms Wellband.
She argued that now is not the time to fix given the uncertainty surrounding the global economy.
Since early this year economists who saw a pick-up coming in the US economy late last year advised borrowers to fix their rates because they were certain they were going to increase as 2002 wore on.
Miscalculations about the recovery has shown the experts to be wide of the mark and many are now of the view that rates, certainly EU rates, are destined to go lower. At present, there is a wide gap in US rates at 1.25% and the eurozone rate of 2.75%. Niall Dunne of Ulster Bank Markets says ECB rates will not change over the next six months unless economic circumstances change quite dramatically.
In his view, rates may fall by another 0.25%, but even for one sceptical about the strength of the global recovery, he says interest rates are very close to the bottom at this point.
Unless things go badly wrong in Iraq and the US economy goes into free-fall, Mr Dunne thinks interest rates have to be close to bottom.
“Fixing mortgage rates now seems like a very good idea to me,” Mr Dunnes added.
