Go for a fixed-rate loan but don't sign up for too long - WITH BILL TYSON
Q – I am buying my first home I and have to choose a fixed or I variable mortgage rate. Aren't interest rates at a record low, -which should mean it's time to fix? Which would you recommend? If you do recommend fixing, should I go for short term or long term?
A - With a fixed rate you have the security of knowing what your repayments are going to be for a set period. The downside is that you may have to pay a penalty if you move home or switch lenders.
You're right in that the European Central Bank's benchmark interest rate is at a record low of 0.15% and can hardly go much lower.
However, what banks charge for home loans is a different matter. And mortgage rates are far from low, so there is room for reductions, especially if the market gets stoked up again by competition.
The big question is, what are the fixed rates? The best deals - ranked cheapest to dearest - are in the table below (Based on first time buyer borrowing over 80% of property value – courtesy of bonkers.ie).
As you can see, 1-3 year fixed rates are cheaper than variable rates, while 4-10 year rates are dearer. I wouldn't go for the longer term rates, even if you can afford them. These have always been high and few, if any, borrowers who took them out have ended up better off.
Shorter-term fixed rates, however, do seem to offer good value at present compared to variable rates.
Normally I would warn against the cheaper one-year rates, which are usually offered by dearer lenders and you pay more in the long run.
But that is not currently the case. The two cheapest one-year fixed rates, of 3.5%, are with AIB and KBC, which are also the two cheapest lenders for your category of borrower.
So you can't go too far wrong with the cheapest one-year fixed deals.
You can get 'the best of both worlds' as you save money yet are not locked in for very long. Once the year is up you can choose either a variable rate or another short-term rate if they remain attractive.
Q - l am a PAYE taxpayer but I have just rented out a house at around €1,1OO a month. How do I pay tax on this? Does it have to be paid this year?
A - lf you earn more than €3,174 a year from rental income, you have to register under self-assessment for both income tax and PRSI. You can do this by filling out a TR1 form.
Self-assessment means paying preliminary tax for each full year by October 31. This is an estimate. You then pay any shortfall or claim back any overpayment by the same date the following year.
You're allowed to estimate your preliminary tax liability as 100% of your previous year's liability.
If it is your first time paying, you don't have to pay for the first year because 100% of the previous year is zero. However, you will have to pay double in the following year.
Forms and a complete guide to self-assessment can be found on the Revenue website, revenue.ie.
Q - We own an apartment. Could you clarify if the management company are liable for water charges? We want to get our facts straight for an upcoming meeting with the company.
A - The occupiers of an apartment are technically I liable for water charges, just as they would be for gas and electricity. Unless proven other-wise, the owner is assumed to be the occupier.
Most apartments will not initially be metered, meaning bills will be sent to the occupiers/owners.
When metering does come in, there should plenty to discuss at your management committee meeting as nobody seems to know how this is going to work where apartments are concerned.