The savings that homeowners can make by switching their mortgages have doubled in the past six months, according to mortgage broker doddl.ie.
Up to 100,000 mortgage holders in Ireland are facing major increases to monthly payments next year as they fall out of historically low fixed-term contracts and into a new era of higher interest rates.
Doddl’s third quarter switching index shows householders may already be paying a “record average” of up to €7,099 in extra repayments per year as mortgage interest rates breach the 7 per cent barrier for the first time in over a decade.
That compares to €3,587 at the end of the first quarter this year as rising funding costs filter down through the pillar banks and non-bank lenders.
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The index is based on the average new mortgage drawn down in the last quarter of almost €300,631 and a highest roll-out variable rate of 7.15 per cent following Finance Ireland’s latest announcement, versus the lowest standard rate on the market, which is 3.85 per cent.
The gap between the highest and lowest rate on the market is now 3.3 per cent. Doddl said the saving of €591.80 per month was the highest it has recorded, and compared to €298.97 at the end of the first quarter.
Doddl managing director Martina Hennessy said there were “even cheaper rates” available for those eligible for green rates or who have lower loan-to-values.
“However, despite the financial attractions, mortgage switching activity has decreased dramatically in 2023 as confusion reigns in the market,” she said.
“People fear that they have missed the boat, but the reality is that the repayment gap is widening, and it is now more important than ever to review your mortgage rate.
“Fear of selecting the wrong options means that we do not act at all, and remain paying needlessly high rates of interest on our biggest outgoing.”
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Ms Hennessy added that while the pillar banks were initially slow to pass on rate increases, this has now changed and there continue to be rate increases throughout the market.
“The non-bank lenders who were immediately impacted by rising funding costs have more than doubled their rates in less than two years,” she said.
“The last time we had this higher-rate environment, between 2006 and 2008, people couldn’t switch, as loans to values were dropping. We are in the opposite place now and the homeowner’s hand is very strong.”
Due to property price inflation most mortgage holders rolling off fixed rates will have an improved loan-to-value and will be eligible for lower rates due to their stronger position, she continued.
“With normal payback and an increase in house values, even mortgage homeowners who purchased three years ago at 90 per cent loan to value may be below the 60 per cent threshold now and be eligible for sub 4 per cent rates,” she said.
“The significant fall in switching volumes at a time when the potential savings have never been greater is something that needs to be addressed.”
