Home Loan Rates – Advantages and Disadvantages

Variable Rate

The Variable Rate may be increased or reduced by EBS from time to time at its discretion.

Advantages:

  • Ability to make lump sum payments or clear the mortgage at anytime without any additional charges.
  • Owner Occupier mortgage customers may be eligible to move to a lower Loan to Value (LTV) interest rate where the LTV changes sufficiently throughout the mortgage. There is more information on this option here.  

Disadvantages:

  • This rate is not directly linked to any reference rate e.g. European Central Bank (ECB) – Base Rate. This means that this rate may be increased out of line of any reference rate movements.
For information on the EBS Variable Rate Policy Statement please click here

Fixed Rate

Where a Borrower applies for a fixed interest rate, it will be for a set period of time. When the fixed rate period ends the loan will convert to the applicable variable rate.

Advantages:

  • The fixed rate may be lower than the applicable variable / tracker rate over the fixed rate period and therefore a borrower may pay less than if they remained on the variable / tracker rate.
  • Once applied, the fixed rate will not be affected by increases in variable / tracker rate movements, which means there is certainty of repayment amounts during the fixed-rate period. This enables customers to budget their outgoings with certainty.

Disadvantages:

  • The fixed rate may exceed the variable / tracker rate over the fixed rate period and so the borrower may pay more than if he or she had remained on a variable / tracker rate for the same period.
  • An early redemption charge is payable in the following cases where the fixed rate period has not expired:
  1. If a capital payment or full repayment is made to the loan, including an involuntary/voluntary payment from a third party source e.g. a payment from a Mortgage Protection policy; or
  2. If the loan is converted to a variable rate; or
  3. If the loan is converted to another fixed rate.
  • If a borrower moves from a tracker rate to a fixed rate, they cannot avail of the tracker rate option on expiry of the fixed-rate term.
  • The variable rate which may be available at the end of the fixed rate term may be higher than that which was available prior to fixing.

Tracker Rate

A tracker rate is a guarantee that the rate being charged will not exceed the ruling reference rate (e.g. ECB rate) by a specified margin e.g. 1.25%. It will therefore track the reference rate as it moves up and down. Please note tracker rates are no longer available.

Advantages:

  • The tracker rate may not be affected by increases in the Variable Rate
  • The tracker rate may cost less than the Variable Rate
  • Ability to make lump sum payments or clear the mortgage at anytime without any additional charge
  • The Tracker Rate may cost less than a fixed rate over the fixed rate term

Disadvantages:

  • The tracker rate may not be affected by decreases in the Variable Rate
  • The tracker rate will be automatically increased in line with the reference rate upward movements
  • The tracker rate may cost more than a fixed rate over the fixed rate term