RTE Drivetime: ‘Talking Money’ to buy or not to buy a property?


  1. DJ O'keeffe

    Dear Karl,

    I really enjoy your analysis.

    Karl you mentioned that you should never borrow a mortgage from the same bank you save with. Would it be possible to explain why?

    Also Jill mentioned that one cannot expect to see the variable rate interest to remain around 4.5% or so for so long as the ECB has dropped its rates near to 0.

    I am trying to decide on two mortgage offers, one from BOI and the other from AIB.

    BOI offer a fixed 10 year rate at 4.99%. I am considering this option as the lowest variable rates are 4.09% at the moment and I am not sure how long that will last for. If the ECB raise their rates, does this mean the Banks will automatically raise their rates?

    It would be great to hear your advice on this.

    Thanks for reading my message, and I look forward to next weeks show!

    • Karl Deeter

      Thanks for the nice comment! The reason for not doing your business all with one bank is that often they have an ‘all sums’ charge which means that they can set off debts against savings and the like. It also gives one institution huge insight into your affairs, this in turn is used by computer programmes that help them market products to you. Nothing wrong with that per se, for instance, google does the same. But with banks it’s not just about piquing your interest, it’s about their products only which reduces choice and makes sure people don’t shop around and this can cost you tens of thousands of euro depending on what you buy.

      The offers you have are both from good banks, but KBC have better rates than both of them at the moment, by going to the people you bank with (I’m assuming it’s with one of them) and the main competitor you miss out on things like offers from KBC. On the interest rate front Jill and I disagree.

      Rates may well go up, but it won’t be for quite a while, secondly, when they do go up there is a strong liklihood that there won’t be a tolerance for them go as high as last time because there is a trend towards ‘lower highs’ on interest rates in the last 30 years.

      Watch out on the fixe rates, this 10yr one is coming at a time when long term rates are looking to be low and that is a high price to pay for the comfort of knowing your payment is fixed. I think the blog has some calculations on this somewhere. Fixed rates are like taking out an ‘insurance’ against a higher mortgage rate – that’s a handy way of thinking about it, so how much does that risk mean to you in terms of the price you are willing to pay to insure against it?

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