There has been a surge in mortgage customers seeking to lock in fixed rates before they rise again.
Large numbers of homeowners who are exposed to interest rate rises are rushing to lock in to good-value fixed rates, it has emerged.
In a significant market shift, many people are also ditching more expensive tracker mortgages in favour of long-term fixed rates, brokers said. Trackers have been considered the best value mortgages and until recently such a move would have been considered illogical.
The European Central Bank (ECB) is expected to start raising its key refinancing rate in the coming months, a move that would make trackers and variables more expensive and mean higher new fixed rates. Broker Martina Hennessy of Doddl.ie said there has been a surge in customers seeking to lock in fixed rates before they rise again. She said the switcher application numbers had doubled in the first three months of this year compared with the same period last year.
The numbers were boosted by Ulster Bank and KBC Bank customers who wanted to move mortgage providers before their mortgages are sold.
“But also, and increasingly in the last two months, due to the expectation that rate increases are more imminent,” Ms Hennessy said.
Rather than fixing for three and five years, mortgage holders were now opting for fixes of five, seven, 10 and 15 years.
Yesterday, Dutch central bank chief Klaas Knot raised the prospect of a 0.5pc rise in ECB rates in July. Mr Knot, who is on the governing council of the ECB said the rate rise would be needed in July if inflation continues to climb. If as expected the ECB pushes up the refinancing rate three times in the next year it will cost a typical variable-rate customer, or those on trackers, an extra €1,000 in repayments.
Each 0.25pc rise in the ECB rates will cost €30 more in monthly repayments for a €250,000 mortgage. This week ICS Mortgages announced a second rise in its mortgage costs. Its three and five-year fixed rates will increase by 1pc across all loan-to-value (LTV) bands. It comes just two months after it increased its rates. The latest increase of 1pc means the ICS five-year fixed rate will go from 2.6pc to 3.6pc.
This means an extra €131 per month, or €1,572 a year, in repayments for a homeowner with a €250,000 mortgage over a 25-year term, and an 80pc loan-to-value, Ms Hennessy said.
Last week Avant Money, which shook up the market here when it launched mortgages for less than 2pc at the end of 2020, is increasing its five, seven and 10-year fixed rates for new borrowers by between 0.2 and 0.3 percentage points.
Broker Michael Dowling of Dowling Financial said some people with poorly priced tracker mortgages were ditching the trackers for fixed rates. Such a move would once have been considered heresy.
Trackers are priced at a set percentage over the ECB refinancing rate, which is currently 0pc. Most trackers are set at 1pc over the ECB. He said those with higher margins than 1pc should get a financial expert to review their situation, especially if ECB rates go to 2.5pc as some economists are predicting.
Whether you are looking to switch lender currently, a first time buyer or moving home, should you have any concerns about the issues raised in this article, or investing in a buy-to-let property, why not chat to a Seaspray Mortgage adviser today about finding the mortgage that’s right for you:
Seaspray Financial Services Ltd trading as Seaspray Mortgages is regulated by the Central Bank of Ireland with registered number C165527