While looking for a mortgage, a major factor to consider is whether you want a fixed or variable rate. Variable rates have the big benefit benefit of being flexible. You also don’t need to worry about penalties if you want to increase your monthly mortgage repayment, pay off your mortgage early, or switch to another lender. You could also benefit from falling ECB interest rates.
On the other hand, variable rates don’t offer stability or predictability. This means your rate is fully in the hands of the changing market rates. Yes, your rate might go down over the term of your mortgage but at the same time, it could go up just as easily. It is near impossible to predict changing rates, especially in a 20 plus year mortgage.
Mortgage rates are very dependent on your loan to value ratio (LTV). That being said, there is a pretty consistent trend of certain banks giving better rates than others. AIB, Finance Ireland and Haven all have consistently the lowest rates for variable mortgages, starting at 2.75%. This low rate may be deceiving however. Lenders are looking for low LTV ratios, and you can only get this low of a rate when you fund 50% of the house value yourself.
With an LTV of 80% the bank is funding 80% of the property value. This means there is more risk for the lenders. At this rate, banks with fewer incentives can give you a rate of around 2.95%. Other banks with cashback promotions or other incentives have rates up to 4.2%. Institutions such as Bank of Ireland and PTSB generally have higher rates. However the initial rate isn’t the only thing to consider.
Some banks offer incentives that may help counteract their higher rates. Bank of Ireland and EBS off 3% cashback for new customers. PTSB also has a 2% cashback deal for their new customers. Other banks give cash allowances for legal fees, which can be up to €3,000.
Doing your research is key when looking for any kind of mortgage, but with variable rates weighing the savings between banks is critical. The lower rates might seem appealing, however some cash back incentives will end up saving you more money. It is very specific to each account, and is different for every person. Seeking professional advice is always a good idea when making this decision.