Mortgages aren’t meant to be set in stone – and sticking with the same one for years could mean leaving thousands of euro on the table.
Whether your fixed rate is about to expire or you’re just wondering if you could do better, switching your mortgage could be a smart financial move.
But how do you know when to switch, what it’ll cost, and if it’s really worth it? We’ve been asking the experts.
Where do I start?
The first step is working out if there is a financial benefit to switching. You will only ever switch if it makes financial sense.
Martina Hennessy, CEO of online broker doddl.ie said there are three pieces of information you need when assessing if you can save by switching.
“You need to know the approximate value of your home based on what similar properties recently sold for in the area, your current mortgage balance and your Building Energy Rating (BER),” she said.
She explained how lenders tier their rates by mortgage value, with ‘high value’ mortgages of €250,000 or more commanding lower rates.
Some lenders also tier rates according to a home’s Loan-to-Value, or LTV.
“This is the mortgage divided by the value of your home,” Ms Hennessy explained.
Finally, some lenders offer low rates if you have an A or B energy rating, under their ‘Green’ rate products.
Once you have this information, Ms Hennessy said you should compare your current lenders rate to what’s available on the market and work out the financial gain of switching.
How much does it cost to switch?
The main costs involved are legal and valuations fees.
Sean Corbett, Director of SYS Mortgages said legal fees are usually €1,500, while valuation fees are around €180.
You also need to check if there are any breakage fees if you do switch.
“However, these can be offset by cashback offers,” Mr Corbett said.
“Also, the option of getting a better rate can also offset these costs within months,” he added.
Mr Corbett said a good broker will estimate costs and advise on the viability of moving.
“In some cases it’s not worth it – but it is always worth checking,” he added.
It’s worth noting that six lenders in the Irish market currently offer cashback to those switching their mortgage.
Ms Hennessy of doddl.ie said cashback offers range from €1,500 right up to 2% of your mortgage back in cash at draw down.
“So, with a €400,000 mortgage for example, you will get €8,000 lodged to your current account within 40 days of mortgage draw down – which will top the cost of switching in most cases,” she added.
How much could I save by switching?
The latest figures from doddl.ie shows that mortgage holders can save up to €7,505 per year by switching their mortgage.
This is based on the average mortgage drawn down, which now stands at €346,842.
The quarterly index tracks the savings available to mortgage holders in Ireland through switching and has shown that switcher savings have doubled in the last five years.
Ms Hennessy of doddl.ie said there are two reasons for this.
“We are now borrowing €112,000 more than we were in 2020, a trend driven by increased borrowing levels as a result of rising property prices.
“There is also a huge disparity between rates in the Irish market with the lowest rate starting from 2.98% and the highest at 6.15%,” she explained.
These savings have led to a resurgence in mortgage switching, with figures published this week from Banking and Payments Federation Ireland showing that switching activity for July rose by 27% in volume terms year-on-year, and by almost 50% in value.
Is it difficult to switch?
Like any mortgage application, switching will involve time and effort.
However, Mr Corbett of SYS Mortgages believes it is relatively easy when you think of the long-term savings you could make.
He pointed out that some lenders even accept reduced documents compared to a first-time mortgage.
But he did acknowledge that challenges exist.
“People who have been sold to vulture funds may find themselves often stuck with high rates, but lenders now seem to be more accommodating to these types of borrowers and there are finally some options available,” he said.
Ms Hennessy of doddl.ie said switching requires a little more work than switching your utilities.
But added that the savings can be huge, which can make the time you take to gather documentation worthwhile.
“There is an application process involved as the lender needs to ensure the mortgage is still affordable,” she said.
“However, the required documents, such as bank statements and payslips, should be readily accessible online,” she added.
What is the best rate on the market?
Rates in Ireland fell below 3% in June for the first time in over two years.
Avant Money’s Flex Mortgage variable rate now starts from 2.98%, while the lowest fixed rate on the market is at 3%.
While there is competition in the market, Mr Corbett of SYS Mortgages said there are still not enough lenders.
“The upcoming arrival of Revolut will be a welcome addition,” he said.
Will rates fall over the next few months?
Following an upward rate cycle from 2022 to 2024, rates have dropped quite considerably over the last 18 months.
“Some lenders have tweaked rates to remain competitive over the past six months but rates have stabilised,” said Martina Hennessy of Doddl.ie.
While we may see some downward movement on individual rates, Ms Hennessy said not to expect mass rate cuts in the near term.
Article Source – Overpaying? How to switch your mortgage and save
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