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This month between 500 and 700 homeowners will switch their mortgage provider. This may not seem a lot when you consider that there are 800,000 mortgage policies in Ireland.
However, you can disregard at least half of those policy holders as switchers as they have either secured a good fixed rate or they are happy on a variable rate. And of course, there are those lucky few that secured the much-coveted tracker mortgage back in the day and with the lowest rates on the market, they’re not going to be switching anytime soon.
In light of this, that figure of 500 to 700 switchers would be considered a strong switcher market, especially as it moves from average figures of 200 to 300 switchers per month last year. And it is expected that even more households are going to make the move due to rumblings that the ECB are positioned to up their interest rates across Europe.
On the cards
Even before the war in the Ukraine, this was on the cards in order to cool inflation. And they wouldn’t be the first out of the traps as Central Banks around the world have already made the move, in the UK, the US and New Zealand.
How much they will increase and how often is the real question but even a rise of 0.5% could mean some consumers on variable rates are looking at an annual increase of close to €1,000.
This may encourage those on a variable rate to lock in a set amount by switching to a fixed term rate and it may also incentivise those that are coming to the end of a fixed rate term to switch before these increases come in.
Switching is an arduous task but the financial benefits can be worth it. In fact, Daragh Cassidy, Head of Communications at Bonkers.ie says if you are paying an interest rate over 3.5% on a fixed term mortgage and you still have a few years left on that rate, switching is most likely going to be worth it.
How much can you save?
Let’s take a profile of the Murphy family. Their property is worth €350,000 and they have €250,000 left on their mortgage over 15 years. They are currently paying an interest rate of 4%.
By switching, there are six different providers that could save them between €223 and €251 a month.
The most competitive fixed rate is being offered by Bank of Ireland. Their 4 Year Fixed High Value LTV* 61-80% would save the Murphy’s €251 a month, which over the 4 years amounts to €12,048.
Unfortunately, making the move to switch your mortgage is quite an arduous task that can take up to six months to complete.
This mortgage has quite a few caveats involved in order to avail of it. But even if they didn’t go with that option, Haven’s Green Fixed 4 Year would see them saving €240 a month (€11,520 over the four years) while Permanent TSB’s 4 Year Fixed Rate New Business is a saving of €234 a month (€11,232 over the four years).
This is potentially a huge saving for the Murphy’s and calculating this information takes just minutes on www.bonkers.ie. Unfortunately, making the move to switch your mortgage is quite an arduous task that can take up to six months to complete.
Think back to when you were a first-time buyer. You’ll have to go through the whole process again, just this time without the stress of actually trying to buy a property. So that involves everything down to your proof of address. You’ll have to provide six months of current account statements, credit card statements, loan statements etc.
You’ll have to employ a solicitor which could cost €1,000 and pay to get a professional valuation of the house again.
Also if you are breaking a fixed term contract, you will need to pay a penalty fee. This varies but it could be €1,500. However, when you consider the potential savings that a family like the Murphy’s could make, the effort is worth it.
*Loan to value (LTV) is the relationship between the loan amount and the market value of your asset.
Ulster Bank and KBC Customers
Currently, there are 12 mortgage providers in the Irish market. However, in the coming months, that will reduce to 10 as two players-KBC and Ulster Bank pull out of the market. So what happens if you have your mortgages with either of these providers?
Daragh Cassidy advises that currently you don’t have to do anything and this won’t affect your repayments. He explains, “Essentially, your mortgage is going to be sold on.
“KBC mortgages will transfer over to Bank of Ireland while most Ulster Bank mortgages will transfer over to Permanent TSB. You will be notified of this and you don’t have to do anything if you don’t want to. So if you have a fixed rate, that cannot change. If you have a tracker, that cannot change.
“The situation people need to be aware of is if for example, you are an Ulster Bank customer and your fixed rate mortgage term is up soon. Traditionally, Ulster Bank would have offered customers a new fixed rate similar to the rates they were offering new customers.
This isn’t the case with Permanent TSB. They have competitive rates for new customers but not for existing customers
“So if you are an Ulster Bank customer, take note of when you’re fixed term mortgage is up and about six months beforehand, look at shopping around to get the best deal you can.
“In the immediate future though, what most Ulster Bank and KBC customers should be focused on is getting a new current account sorted.”
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