Gráinne McGuinness offers more consumer advice, this week for mortgage holders.
An Irish mortgage expert is warning that an increase to the European Central Bank rate is almost certainly on the cards between now and 2021. The ECB rate will have an impact on mortgage rates but there is some good news for cash-strapped homeowners.
Joey Sheehan of mymortgages.ie believes Irish mortgage-holders are in a strong position to cancel out the impact of such increases by switching lenders and availing in particular of fixed rate offers.
“Mortgage holders with more than 10% equity in their home are in a particularly strong position,” Mr Sheehan said. “So, it’s time to be proactive in reviewing your mortgage and ensuring you get a piece of the rate war savings pie.”
These savings are possible because of what Mr Sheehan describes an impending explosion in the fixed rate mortgage market in Ireland.
KBC is the latest to slash its rates to 5-year fixed rate to 2.8%. Ulster Bank are now offering a 2.3% 2-year fixed rate and a 3.25% fixed rate for 7 years. PTSB have also recently dropped its fixed rates to 3.7% for existing customers.
According to the mortgage brokers, these cuts signal real savings for mortgage holders.
Irish mortgagees are less inclined to fix their rate than their European counterparts, but that is changing – latest figures showed that fixed rate mortgages accounted for 54% of new agreements over the three months to May 2018.
This is all well and good for people taking out new mortgages but the only way existing customers can benefit is by switching.
The savings in Dublin could be even higher, up to €143,657 over the lifetime of the mortgage. These figures are based on moving from a rate of 4.1% to 2.6% and having an LTV of 90% or less.
Mr Sheehan is aware the idea of switching is off-putting to the average homeowner but says the benefits are too big to ignore.
“We deal with clients on a daily basis who are unaware that switching could even be an option for them – many believe they are simply “locked in” to the contract with their current lender,” he said. “And of those who have heard of switching, most just think it’s too much hassle.
“Mortgages are just like any other financial product – they should be reviewed every 3 years to ensure you are not paying over the odds.”
Actually committing to the switching process may sound painful but could be the single best financial decision you make for years. Remember, switching is not comparable to the process when you first bought your home and took out a mortgage.
I firmly believe it is the memory of months of paperwork and proving repayment capacity that puts mortgage-holders off switching. But in this new situation you have already qualified for a mortgage and have been meeting repayments for some time, so getting approval for a new loan is far more straightforward.
To get the ball rolling, contact your existing lender and confirm your rate of interest, balance outstanding and term remaining on the mortgage. Ask the lender if the variable rate you are on is the best available and what fixed rate options are available as an existing customer.
Then either compare rates with other institutions yourself or contact a mortgage advisor and ask them to compare your existing terms to appropriate alternatives.
With six-figure savings to be made over the lifetime of your mortgage, can you really afford not to check out your options?
Mr Sheahan concludes: “A mortgage is the biggest financial undertaking most people will ever make and yet it’s something that people don’t pay enough attention to when it comes to getting the best value on the market.”
If you are interested in switcher mortgages and would like to speak to us at MyMortgages.ie please don’t hesitate to contact us at [email protected] in Cork +353 21 4277037 or 353 86 8060601
MyMortgages Limited trading as MyMortgages.ie is regulated by the Central Bank of Ireland.