Mortgage Switching

The average Irish homeowner is needlessly paying up to €3,380 in extra mortgage repayments per year by not switching lenders, a new report has found.

The spread between the highest and lowest interest rates available on the market has now grown to 2.2% or €281.63 per month in terms of monthly repayments for an average private dwelling house mortgage.

This large spread means monthly repayment savings of up to 26% are possible for mortgage holders, according to the Q2 doddl Mortgage Switching Index.

This gap between the lowest non-discounted mortgage rate at 2.3% and the highest at 4.5% has widened from 19.2% at the same stage last year, when the potential saving was €210.37.

Compiled by impartial mortgage switching experts, the Index highlights the differential between the lowest and highest non-discounted interest rates on the market – and the potential savings available.

The highest rate of repayment on the average 25 year mortgage as at Q2 2019 is €1,335.42, while mortgage holders on the lowest non-discounted rate are paying €1,053.79.

The Index is based on the average mortgage drawn down for new lending in both the first-time buyer and second-hand mover markets as at Q2 2019, currently €240,256.

The rate of mortgage switching has more than trebled in the past four years, the doddl Index shows.

“Just 5.4% of new private dwelling house credit was switcher related at the end of 2015. This increased to 14.3% in Q4 2018, and has jumped further to 14.6% in Q2 2019,” said Managing Director Martina Hennessy.

The doddl Index looks at the total number of switcher transactions per quarter as a percentage of all home loan transactions, excluding Buy To Let mortgages, to give an accurate picture of principal private dwelling house credit.

“Consumers are becoming more aware that switching can save them money, mainly thanks to Central Bank requirements on lenders to make mortgage switching easier,” said Ms Hennessy.

“Loan to values have decreased as property prices have increased and so more homeowners are dropping below the 80% and 60% loan to value tiered thresholds which result in lower rates being available on their mortgages.

“Current bank mortgage switching packages have also removed the previous deterrent of cost to switch mortgage, and in most cases financial institutions will provide a lump sum amount, once the new mortgage is drawn down which generally covers any transaction cost to switch mortgage”.

“These switcher packages range from value €1,650 to up to 3% of the mortgage amount outstanding back in cash.

“The easier it becomes to switch, the more people will realise that they are not tied to one financial institution if there are better rates on the market”.

“The Index illustrates the disparity in rates available on the market, and mortgage holders should be aware of mortgage interest rates available and of the substantial savings that can be made by switching mortgage provider.

“With such choice on market with regard to rate and cashback offers it is important to get impartial advice to help you understand all available options available to you with regard to mortgage switching rather than directly responding to a marketing message from an individual bank.”

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