QA: Q I currently have a number of tracker mortgages with Bank of Ireland. I appreciate that these are at very favourable rates to me. However, I am considering fixing now as I believe that inevitably the ECB rate will increase over the next few years.
Bank of Ireland’s three-year fixed rate is 3.6 per cent. If I were to fix for a three-year period, in your view am I likely to be better or worse off? A friend who is a mortgage broker has advised me to fix now before the fixed rates currently on offer are increased. How quickly do you think the ECB rate will be increased and is it possible to say by how much?
Mr R.C., Kildare
AUnlike your friend I am not a registered financial adviser; nor am I a clairvoyant. Having said that, the best guidance currently on offer is that European central Bank rates will rise only in the second half of this year at the earliest. A number of analysts are now openly speculating that any rise may not occur until 2011.
There are a number of factors you need to consider here. First up, you say you have a number of tracker mortgages in place. How long are these for? Bank of Ireland only introduced tracker mortgages in June 2001 so, at best, you are only 8½ years into your mortgages – and probably a good deal less.
If you are looking at 20 or even 30-year loans, you need to bear in mind what will happen after your three-year fix expires. One thing for certain is that you will not find a tracker available at that stage and the margins on variable rate mortgages are likely to be higher.
The other issue is the rate of your current tracker, which you don’t provide. You are right that ECB rates will rise – whenever that happens. We don’t know how fast and how far they will go.
Trackers generally allow a one percentage point variance from the ECB rate which would suggest you might be paying about 2 per cent now. To hit 3.6 per cent, rates would need to rise seven times by a quarter point each time to make your fixed rate look attractive – and you would be paying that fixed rate from now.
Clearly it depends on the length of time outstanding on your mortgages and the rate you are currently paying, but it appears to me that the balance of favour still appears to rest with the tracker mortgage rather than a switch to a fixed rate.
Irish Nationwide windfall
Q In a February 2009 column you kindly answered my query regarding my elderly relatives who were hoping a windfall from Irish Nationwide to pay for much needed renovations to their home.
They still hope for something to emerge for their benefit despite the situation. I had hoped to persuade them to go ahead with the work that I had obtained estimates for on a recent visit. Do you think there is any possibility for those with accounts with Irish Nationwide or even EBS to receive even a small payout when the dust settles.
Mr D.G., Antrim
AUntil the deal is closed, I suppose you can never say "never". However, I cannot see any circumstances in which an effectively broken institution could consider paying a windfall to its members as they depart to another entity. Might any merged institution ultimately demutualise? It's possible but if I were an elderly person looking to fund renovations, I wouldn't bank on it.
Deductible expenses
Q I am the owner of a rental property in Dublin, but I am living in Limerick. In order to take care of items at the property as the result floods and frost, I have had to travel to Dublin on a number of occasions, and I have incurred an amount of expenditure on making these trips, e.g train fares, accommodation, meals, etc. My query is can I deduct these expenses in my tax return from the rental income?
Ms S.C., Limerick
AI'm afraid not. There is a range of expenses incurred in renting a property that are allowable against rental income for the purposes of assessing tax liability.
Of most relevance in your case is the fact that these include the cost of repairs and maintenance. However, there is no provision to claim for your own time. The sort of costs you have incurred in attending to the property would come under this category and would therefore not be allowable as a tax offset on rental income. Of course, any costs incurred in actually repairing items at the property itself would be covered.
Please send your queries to Dominic Coyle, QA, The Irish Times, 24-28 Tara Street, Dublin 2, or e-mail dcoyle@ irishtimes.com. This column is a reader service and is not intended to replace professional advice. Due to the volume of mail, there may be a delay in answering questions. All suitable queries will be answered through the column. No personal correspondence will be entered into.
