Making Cents: Opportunities knock in the mortgage market

This scenario creates significant stress for potential buyers and makes them less conscious of rates than they are of getting a mortgage in the first place.

However, the rate you pay will have a massive impact on your finances, over decades. Joey Sheahan, head of credit with MyMortgages.ie, believes more people should be looking at fixed-rate mortgages in particular, as they offer a number of benefits.

“Some of the banks have incentivised borrowers to take a fixed rate for various periods,” he says. “The reason they are offering it I assume is to incentivise people to lock in for four years so the bank know they can keep that business on their books.

“Historically, fixed rates would be higher than variable but this is an opportunity for borrowers right now, certainly ones who haven’t reviewed their rates for a while, that they can avail of a fixed rate that is less than a variable rate, an excellent rate offering. A fixed rate is now the most attractive rate in many cases.”

He says they are particularly appealing for some cases: “Certainly for first-time buyers, who want to budget their outgoings and know exactly what they will be paying, having certainty around payments is a good idea.” Other borrowers may want more flexibility but Mr Sheahan says many of the banks will now work with them on that.

“We see more and more people looking to split their rate,” he says. “So they might fix 80% of the rate and leave a percentage on variable to allow them to overpay on the variable portion with no penalties. Some lenders will also allow you to pay a portion of the mortgage without any penalty, some may charge a penalty to overpay on a fixed rate, but in general we are seeing more of a demand for fixed rate from borrowers.

“Most of them will offer a split, if someone is not sure they can go 50% fixed, 50% variable or whatever split they want, it gives more flexibility.” The ECB rate is an at an all-time low and while no one can predict the future, fixing your mortgage rate offers protection against increases for the term that is fixed.

“The UK and the US have both recently introduced rate rises so at some point, I don’t think it will be in the short term but in the medium- to long-term, there will be rate increases,” Mr Sheahan says. “When, who knows? It depends on external, global factors too.”

He says existing mortgage holders should also review to see if it would be worth their while moving their rate, or even changing provider.

“It baffles me that people don’t switch more,” he says. “If you are getting a new mortgage or changing your existing mortgage to a new bank, you are going to get new business rates so it is in your interest to review your mortgage every couple of years. Every two to three years people should look at what they are paying, same as they would there utility bills or anything else.”

He believes homeowners can have the incorrect view that switching will be as much work as their initial mortgage application. First-time buyers might have to scrape and struggle to get passed. But once they have a mortgage and have shown repayment ability, that they can service the mortgage, refinancing approval is more straightforward,” he says.

Normally, customers are told to focus on rate when choosing their mortgage. This is valid but MyMortgages.ie says current cashback offers also suit some clients.

“Some banks will offer up to 2% cash back upfront,” Mr Sheahan says. “In certain circumstances we see people happy to pay a higher rate in order to receive the cash back because they need that key to furnish the house or pay legal fees or whatever.

“While it advisable to pay the lowest rate, we do see some people opting for a slightly higher rate in

exchange for a cash incentive. With the mortgage payment it would take them a good chunk of time to save the money.”