Changing your mortgage in time could save you up to €3,952 a year, according to figures from Doddl.ie….
“It is now more important than ever that mortgage holders coming to the end of a fixed term seek out market-based advice when deciding on what their next rate should be……”
Thousands of homeowners coming to the end of fixed-rate mortgages have been warned they face hikes of almost €500 in their monthly repayments.
Around 50,000 homeowners will roll off fixed rates in the next three years.
And those who fixed their rate at 2.5pc in the past five years, on a typical mortgage of €253,950, could be facing fixed rates of up to 5.95pc, meaning an extra €5,870 a year in repayments or €490 a month.
According to research done for the Irish Independent by online mortgage broker Doddl.ie, mortgage holders rolling off fixed rates could save up to €3,952 a year by switching their mortgage now.Doddl.ie managing director Martina Hennessy said rates are continuing to rise. She urged those nearing the end of a fixed rate to check if breaking out of their current fixed rate early will lead to future savings.
“The key decision for those on fixed rates with short terms remaining is whether to exit their fixed rate early to lock in a rate before they rise further,” Ms Hennessy said.
She said that rising funding costs for lenders means it is unlikely that anyone who locked into a fixed rate over two years ago would have a break penalty.
“For the majority, switching now will not result in lower than current repayments, but you could save massively in the medium term if you get market-based advice and choose the right rate rather than accepting the first rate offered to you by your lender.”
Ms Hennessy said the mortgage rate hikes seen in the last years are likely to continue. The European Central Bank (ECB) has raised its key lending rates five times, with two more increases expected in the next few months.
The main banks were slow to react to the initial ECB rises, but are unlikely to keep rates at their current levels.
The higher cost of borrowing comes after Permanent TSB, Bank of Ireland, AIB, Avant Money, Finance Ireland and ICS Mortgages have increased their fixed rates, with AIB also raising its variable rates. Non-bank lenders ICS and Finance Ireland, which have grown their market share to 15pc collectively, were the first to announce increases and now have some of the highest rates on the market. Finance Ireland has the highest rate, a five-year fixed rate of 5.95pc, Ms Hennessy said.
“A mortgage holder with Finance Ireland could switch to a five-year rate of 3.5pc, saving €351 per month on a €250,000 mortgage, or €21,060 over the five-year fixed term,” said Ms Hennessy.
“Finance Ireland have recently announced a variable rate increase to 6.9pc from mid-March – a rate unseen in Ireland for over 20 years.”
The lowest mortgage interest rate is now 1.2 percentage points higher than it was 12 months ago.
This highlights the additional costs that will be incurred by mortgage holders exiting fixed rates, Ms Hennessy said.
According to calculations done for the Irish Independent by the Doddl.ie mortgage switching index, mortgage holders rolling off a fixed term onto a variable rate of 5.15pc could save up to €3,952 a year by switching their mortgage. This is based on the average new mortgage draw down in the last quarter of just under €296,000. The saving can be made by opting for the lowest non-green rate on the market, which is currently 3.15pc.
“It is now more important than ever that mortgage holders coming to the end of a fixed term seek out market-based advice when deciding on what their next rate should be,” said Ms Hennessy.
Whether you are looking to switch lender currently, keen to switch to a suitable fixed rate, are a first time buyer or moving home and 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 or rate that’s right for you:
tel.+353 83 099 0442 or email john.finnamore@seasprayfs.ie
EON
Seaspray Financial Services Ltd trading as Seaspray Mortgages is regulated by the Central Bank of Ireland with registered number C165527
References
Weston, C. (2023) ‘Thousands of homeowners urged to switch as they face €500-a-month hike when fixed rate mortgage ends.’, Irish Independent, 27 February. Available at : https://www.independent.ie/irish-news/homeowners-hit-by-rate-rise-as-permanent-tsb-raises-interest-on-fixed-rate-mortgages-42153755.html
(Accessed 27 February 2023).
