When talking about mortgages there’s a lot of jargon being thrown around the place. Loan to Value (LTV), stamp duty, approval in principle, it’s no wonder people can get confused. One of the biggest questions that borrowers will need to answer when applying for a mortgage is whether they would like it to be fixed or variable, but what does that even mean? Let’s break it down.
What is a fixed rate mortgage?
A fixed rate mortgage is a home loan for which the interest rate is kept the same for an agreed amount of time. The maximum length of time for which a mortgage can be fixed in Ireland is ten years.
Okay, so what is a variable rate mortgage then?
Variable rate mortgages are mortgages for which the interest rate can rise or fall.
Is one type of mortgage definitively better than the other?
Unfortunately, it’s not that simple. It’s up to you to decide which type will suit your needs but to make this decision a little bit easier we’re going to go through the pros of cons of each.
Fixed rate pros
- Because your interest rate stays the same, this means that your mortgage repayments will remain static for the length of the fixed rate period..
- This also protects you from fluctuating interest rates.
- Having your mortgage repayments stay the same allows you to plan for your monthly expenses and can be a better fit for those on a tight budget
Fixed rate cons
- If the lender’s interest rates drop, those on a fixed rate mortgage will miss out on lower repayments
- There may be a cost associated with leaving a fixed rate mortgage, whether you want to choose another rate or move to another bank.
Variable rate pros
- If interest rates drop so do your mortgage repayments
- You have the flexibility to add lump sums or increase your payments which will save you interest and may help you to pay off your mortgage quicker.
Variable rate cons
- Your payments may vary over the term of your mortgage depending on the variable rates, this mean you may not know what your mortgage repayments will be month to month which can make it difficult to budget
- Your repayments could increase significantly depending on interest rates
Green Mortgage Fixed Interest Rate
The Green Mortgage fixed interest rate is a discount (reduction) of 0.20% that we apply to our standard mortgage loan fixed rates. The Green Mortgage fixed interest rate is available to you if you are buying a property that has a Building Energy Rating (BER) of A3 or better or are borrowing to build or up-grade your home so that it has a BER rating of A3 or better, AND you draw down your new mortgage loan between 18 July 2019 and 30 June 2021. Click here for full details and terms and conditions.
High Value Mortgage Fixed Interest Rate
The High Value Mortgage fixed interest rate is a five-year fixed interest rate with no Cashback. The High Value Mortgage fixed interest rate is available to you if you are buying or building a property to live in as your home or are switching your mortgage loan to the Bank of Ireland Group from another mortgage lender outside our Group, AND you are borrowing €400,000 or more, AND you draw down your new mortgage loan between 18 July 2019 and 30 June 2020. Click here for full details and terms and conditions.
As you can see, there are advantages and disadvantages to each type of mortgage interest rate. Which one will suit you is something that you will need to decide.
Before you make your final decision, it is always a good idea to compare the various rates and offers. Arming yourself with all the information will ensure that you’re making the best decision for you. .
“Bank of Ireland Mortgage Bank trading as Bank of Ireland Mortgages is regulated by the Central Bank of Ireland