Where to get a mortgage deal

Tracker mortgages, with their attractive rates, are on the way out, but borrowers still have choices

Tracker mortgages have been a very attractive option for homeowners in Ireland, offering better rates than standard variable rate mortgages. The problem now is that many lenders have stopped offering tracker mortgages altogether, and those that still do are making the rate comparable with variable rates. Trackers follow the European Central Bank (ECB) rate, charging borrowers a margin above it.

Brian Rooney, director of White Star Mortgages says: "The feeling is that banks are looking to phase out tracker rates in favour of variable and fixed rates which give the bank more control over what margins they can put on each rate. This is down to banks borrowing at higher interest rates than the ECB base rate of 4.25%. There are still some good tracker rates available, and it is definitely worthwhile to take some time to ensure you are on the most competitive tracker rate."

Tracker mortgages are available from the likes of NIB, Halifax, Bank of Scotland and AIB. Rooney believes there is still some great value in low loan-to-value tracker mortgages, and with some fixed rate mortgages. Loan-to-value (LTV) is the value of the loan compared to the value of the home.

Rooney says one option for switching one's mortgage is to get a good tracker or fixed rate. With tracker options becoming less available and the criteria for approving a mortgage getting tighter, "it makes good sense if you can secure a good tracker margin now. It is more cost-effective and will protect you from any lender rate increases as only the ECB can dictate any movement to your rate." An alternative, he adds, is to secure a good fixed rate.

Buyers should also check the small print to ensure the spread is fixed for the life of the loan.

To fix or not to fix?

Now could be a good time to fix, says Karl Deeter, operations manager with Irish Mortgage Brokers.

"Some senior analysts feel the credit crunch won't be fully played out for at least three years and that therefore a three-year fixed mortgage would be a way to protect yourself against potential rate increases during that time."

However, given that the European Central Bank is likely to continue its policy of inflation control, Europe will need to see inflation reduced before homeowners can expect lower interest rates. If inflation cannot be controlled, rates will have to rise.

The each-way bet

Brian Rooney says another option is a 'split' mortgage, which is made up of 50% tracker and 50% fixed rate.

The 'split' option is a far better one in the current market than a fixed rate, says David Orr, direct lending manager at new online mortgage provider Chill.ie.

"The best available tracker and two-, three- or five-year fixed mortgage gives you the best of both worlds. It's really hedging your bets. Most lenders are flexible these days and want the business, so they will let you build a product that suits you."

However, he adds, if you have had a fixed, predictable income for the past two or three years, a fixed rate mortgage is the only one to go for. Tracker mortgages are not advisable because, if interest rates rise yet again, your mortgage repayments will head north. If, on the other hand, you are in a job where there are guaranteed bonuses and increments, your situation is more flexible.

The best mortgage rates

The answer to this question is changing daily. Almost every week, financial institutions are changing their rates and conditions. The keenest rates also depend on individual circumstances such as your LTV. Those with larger loans and LTVs at 50% or lower can get better rates.

The best standard variable rate, according to price comparison website Mycash.ie, is with Halifax at 5.05%. The worst deals come from Irish Nationwide (a whopping 5.99%), and Permanent TSB (5.9%).

Halifax also has the best standard tracker rate, at 5.3%, looking really cheap alongside First Active's 6.4% and Ulster Bank's 6.5%.

Yet again, Halifax has the best two-year fixed rates, with 5.59%. First Active is again at the expensive end, with a rate of 6.5%.

Meanwhile, the best three-year fixed rates this week come from AIB. Its rate is 5.45%. First Active's rate is 6.4%, which is the most expensive.

Nailing down the best deal

Mortgage advisers say that anyone thinking of switching to another mortgage deal should speak to an independent broker (ie mortgage adviser) and assess the options available. However, remember that the cheapest rate the broker can find you is not always the cheapest rate available. It's often the case that the rate they quote you will be slightly higher than the rate offered by an individual bank branch. This is due to the fact that the broker's commission is factored in to the quote as part of the transaction, even when you don't pay the broker anything. So, for example, if the best rate the broker can find is with AIB, check with your local AIB branch to see whether it can give you an even better one.

Remember also that brokers don't do business with the likes of NIB or Halifax, which offer some of the best rates. So make sure to check all the providers. You can do his easily by checking the mortgage tables at Mycash.ie.

If you're shopping around for the best deal, make appointments with several lenders. Make it clear you are researching the market and not yet ready to make a decision.

If you decide to use a broker, ask how many lenders they will get quotes from. The higher the number, the greater your options.

Even if you decide not to switch to another mortgage provider, you can still negotiate with your current provider. David Orr says: "Do your research on the rates available, then prompt your bank with a phone call to see whether they have any better ones. That can reduce your rate overnight."

What if you're in financial trouble?

The first and most important step is to call your lender and let them know, then agree a way to pay, and budget accordingly. Anything short of this, says Karl Deeter is "the financial equivalent of realising your house is burning and not calling the fire brigade".