Should I stay or should I switch? That’s what the majority of people who have a mortgage in place are asking themselves right now.
The European Central Bank (ECB) raised its main interest rates four times in a row in 2022 in an effort to fight against runaway inflation. The central bank expects inflation for the Eurozone at 6.3% in 2023 and also a recession for the euro area, which means there are more interest rate increases to come, not to mention the hardship a recession will bring.
ECB Interest Rates 2022
Bank of Ireland has implemented another mortgage rate increase from January 2023. New customers will see fixed rates increase by 0.75%, and existing customers coming to the end of a fixed rate will see an increase of 0.5%. The latest news has concerned homeowners about whether they will be able to make their mortgage payments.
That’s why many householders are considering switching their mortgage for a lower interest rate. According to the Central Bank of Ireland’s research, three in five people in Ireland could save €1,000 or more within a year of switching. And over 60% of switcher mortgages are €10,000+ cheaper over the remaining term of the loan.
Efforts to reduce your monthly mortgage bill and save money can be achieved by switching to a cheaper provider. You might be able to get a cheaper mortgage from your existing lender, or you may be able to switch to a completely different lender. Here at LowQuotes our award-winning team can evaluate the potential impact on your mortgage payments and overall financial situation.
Switching mortgage from a variable rate or tracker rate
If you are on a variable rate or even potentially a tracker rate there is no better time than now to switch to the lowest rate available to you, to avoid further imminent rate increases by the ECB and lenders. Enquiries from concerned mortgage holders to our offices had experienced increases of over €500 per month, which, over a 10-year period, totals €60,000.
Switching mortgage from a variable fixed rate
If you started on a fixed rate, and at the end of that fixed rate term your mortgage automatically reverted to a variable rate, then your monthly payments will increase.
Another situation is if your mortgage is a short-term fixed rate, you can break out of the fixed rate and lock into a long-term fixed rate in anticipation of the upcoming expected rate increases.
Bear in mind, exiting a fixed-rate mortgage early can be subject to a penalty fee, however, in our experience, the cost of this charge should be weighed against potential savings that could be made by switching.
First, you need to contact your lender to see if there is a penalty, we can then analyse your situation and advise you on what is the best move towards switching your mortgage.
Lenders must legally notify you when your initial rate is set to end, but it helps to keep track of the date yourself as well. It’s important to keep in mind that they will only provide you with their best offer. This might not be the best deal available to you on the Irish market and that’s where we at LowQuotes can compare multiple lenders to guarantee you the cheapest rates.
How much could you save switching?
The potential savings will depend on the rate you are currently on, your remaining term, and your remaining mortgage balance. Also depends on the terms and conditions of your current contract, your current financial situation, etc; the example below will give you a good idea of what you could save by changing your mortgage lender.
Current Mortgage | |
Principal: | €200,000 |
Interest rate: | 3.75% |
Remaining term: | 25 years |
Monthly payment: | €1,028.26 |
New Mortgage | |
Principal: | €200,000 |
Interest rate: | 3.00% |
Remaining term: | 25 years |
Monthly payment: | €948.42 |
Monthly savings | €79,84 |
Savings over 25 years | €23,952.00 |
Switching mortgage can save €79,84 per month and nearly €24,000 over the remaining 25 years. Note it’s only a difference of 0.75% and it doesn’t sound like a lot but if you put that money into a savings plan over 25 years you could pay for your child’s education, early retirement, much-needed home renovations, whatever you please, it is your hard-earned money.
To get a sense of the savings you could experience by switching your mortgage each month, try out our Mortgage Switching Calculator.
What can I save by switching mortgages in Ireland?
The interest rate on a mortgage can vary according to several factors, including the type of rate and lender, as well as your credit score and down payment. If you’re looking to change your mortgage lender we will help you compare your options by showing the current rates for a fixed term.
Brokers and banks in Ireland offer fixed-rate mortgages, but generally, brokers have more competitive rates because of the large volume of mortgages they arrange and the relationships they have built with multiple lenders; some of which are not accessible to the general public and can only be accessed through a brokerage such as LowQuotes. We compare all types of mortgages and interest rates from Ireland’s top lenders: Haven, Permanent TSB, Finance Ireland, ICS Mortgages, and Avant Money.
It is important to understand how small changes in percentage decimals can make a big difference over the long term.
Average mortgage rate in Ireland comparing a bank to a lender
Average Mortgage Rate – >50%-80% | 3 Years | 5 Years | 7 Years |
EBS | 3.75% | 3.75% | 4.05% |
Haven | 3.35% | 3.55% | 3.65% |
Rates on 30/01/23.
For example, using the average mortgage in Ireland of €240,000 and a term of 15 years.
- Haven – 3 years fixed rate (>50%-80%) – Total Interest = €62,915.15
- EBS – 3 years fixed rate (>50%-80%) – Total Interest = €73,459.93
Choosing a broker over a bank in this example results in an overall saving of €10,544.78. Savings that you can put in education savings account to start saving for your children’s college expenses, create a “rainy day fund” or maybe save for a house renovation.
If you want to have an idea of what you could save by switching your mortgage each month, try out our Mortgage Switching Calculator or contact us, we will be happy to help you to give you the best advice on how to switch and save.
What makes you an ideal candidate for switching your mortgage?
To switch your mortgage you have to meet some criteria and this will vary from lender to lender. Your eligibility depends on things like
Having a good credit rating
Your credit rating, sometimes known as your “score,” might be used by lenders to evaluate your application and determine whether you are suitable to switch your mortgage. Your credit record will take into account any loans you currently hold or have taken out within the last five years and monthly repayments made or missed on them and etc.
Typically, if you have a high credit score or rating, you’re considered to be less risky by potential lenders. You can check your credit record for free on the Central Credit Register website. To apply for your credit report you’ll need to complete an application form and provide documents: a photo with signature, such as a passport or driving license, recent proof of your address, and proof of your PPSN.
Having 5 years remaining and a minimum balance
Irish lenders will want to see that you have at least €30,000 remaining on your mortgage as well as five years or more. Anything less and the lender will feel it won’t be worth their while.
Being in positive equity
This means the value of your home is more than the remaining mortgage. For example, if your home is worth €300,000 and your mortgage is €100,000, then you have positive equity in your property of €200,000.
Having positive equity in your home can be good for both you and your lender. If you sell your house, you’ll have enough cash to pay off the mortgage in full, leaving the lender satisfied and you without any debt.
Considering your affordability
The provider will consider your affordability based on your income and outgoings to determine whether you will be able to pay for the mortgage.
If your financial circumstances have changed for the worse since you originally got your mortgage you may not be accepted by any lenders.
Call the best online mortgage broker in Ireland
We are a market-leading online mortgage broker in Ireland with over 25 years of experience. We compare multiple lenders for you saving you the hardship of visiting multiple banks.
Some of our lenders are not accessible to the general public and can only be accessed through a broker such as ourselves which will give you a host of different options.
Our state-of-the-art digital mortgage portal allows you to switch your mortgage from the comfort of your home, you can upload your documents and get approved for your new mortgage all from within your portal, which makes the whole process easier and faster.
Contact us to take control of your finances and make the smart decision to switch your mortgage.
If you want to know more about the benefits of switching you can read our article about why you should switch your mortgage and how to find the best mortgage providers in Ireland.
All our content has been written or overseen by a qualified financial advisor. However, you should always seek individual financial advice for your unique circumstances.
Warning: You may lose your home if you do not keep your repayments.
Warning: The cost of your monthly repayments may increase.
Warning: You may have to pay charges if you pay off a fixed-rate loan early.
Warning: If you do not meet the repayments on your loan, your account will go into arrears. This may affect your credit rating, limiting your ability to access credit in the future.
Warning: The entire amount you have borrowed will still be outstanding at the end of the interest-only period. The lender may adjust the payment rates on this housing loan from time to time. (Applies to variable-rate loans only).
