IS IT WORTH GOING FOR A FIXED-RATE MORTGAGE?

QMy daughter and her husband have secured mortgage approval from KBC to buy their first home. Now they must decide on a fixed or variable rate. What would you advise? How do you rate KBC? And if they do go for a fixed rate, which one is best?

AKBC is keenly competitive. It is the joint-cheapest mortgage provider, neck-and-neck with BoI for fixed rates and AIB for variable rates.

It has been a bit cheeky in the past by not passing on all cuts to existing borrowers in order to give the best deals to newbies. KBC’s standard variable rate crept up to 4.25%.

Fixed rate customers also once went on to a high SVR once their fixed term was up. However, they thankfully changed this policy this week. In the latest round of cuts, the best deals were made available to all customers – even those on SVRs – once they apply for them.

Once a fixed rate is up, you should be able to get the best variable rate too.

As long as KBC sticks to this new policy, I have no problem recommending it. As regards fixed rates versus variable rates, it’s a case of ‘swings and roundabouts’ to be honest. The rates are pretty much the same, so you have to weigh up the merits of fixed and variable and pick what’s best for you.

If you are torn between fixed and variable, KBC’s two-year deal would be a nice compromise because it’s slightly cheaper than the variable already and won’t lock you in for that long.

But if you do really want to be locked in for a long period, bearing in mind the disadvantages below, KBC’s five-year fixed is good value relative to what’s on offer elsewhere.

Here’s a summary of the pros of each type of loan:

Fixed rates:

• Are at the bottom of the interest rate cycle. • Give element of certainty – i.e. your rates won’t go up during fixed period.

Variable rates:

• Are unlikely to go up for 18 months anyway. They could come down further in the meantime due to competitive pressures as they are relatively high by international standards. • Don’t have the significant disadvantage of locking you into a fixed-rate contract. With a fixed rate you may face a hefty penalty if you move house, remortgage, switch home loan, or move to a variable rate before the fixed period is up.

QI have Vodafone shares I received through my Eircom shareholding. I am thinking of selling them but they have fallen a lot in value. Where do they go from here?

AIt’s impossible to say how any share will perform in the future but I can tell you what the experts are saying. The Financial Times recently polled 32 investment analysts who specialise in Vodafone and asked them about the share’s prospects.

The consensus forecast was that the company will ‘outperform the market’.

This fell short of a clear ‘buy’ rating that is the biggest seal of approval from analysts, but it’s the next most positive form of recommendation.

The reasons behind this relative ‘thumbs up’ isn’t because the company is performing so well, but because the share price has fallen so low it has plenty of room for improvement.

And, as always with shares, this is far from guaranteed! In fact analysts have been predicting an upturn since last year, while Vodafone has actually fallen in value.