Homeowners warned not to panic as there is a huge gap in the fixed rates on offer

MORTGAGE holders looking to tie themselves to a fixed rate to avoid skyrocketing rate hikes in Europe have been warned not to panic and sign up for the wrong rate.

The advice comes after it became apparent that there has now been a huge gap in the market between the highest and lowest fixed rates on offer.

This is particularly true for five-year fixed rates, as the latest study has found Irish Independent Doddl.ie Mortgage Switch Index.

Getting into the first fixed rate on offer could cost the average homeowner an additional €30,780 over that five-year period, the Index says.

According to Doddl.ie Managing Director Martina Hennessy, there has been a massive three percentage point gap between the highest and lowest five-year rates.

“In the five-year fixed rate market right now, there’s a huge 3.05 percentage point difference between the top rate of 5.5 percent and another lender’s rate of 2.45 percent,” Ms Hennessy said.

She said that on an average 30-year home loan of €292,939, the difference between those two interest rates is €513 per month.

Over the five years, that makes a difference of €30,780.

“The key message is don’t panic and go for the first fixed price that’s offered to you,” Ms. Hennessey said.

“Make sure you market
based advice, because if you commit to an interest rate, you could be paying significantly more on your mortgage, even in the short term.”

She said we are now out of a cycle of low interest rates and heading into what appears to be a longer streak of rate hikes than anticipated earlier this year.

The index is based on the average mortgage taken out for both first-time buyers and new loan originators
used car markets
in the third quarter of this year.

The highest aggregate rate in the Irish market is currently a
five-year fixed rate of 5.5 percent, while the lowest available is four-year fixed rate of 2.15 percent.

Many tracker mortgage holders are now looking to switch to a fixed rate after the European Central Bank’s benchmark interest rate rose 2 percent in the last four months and further increases were forecast, Ms Hennessy said.

“We’ve seen a significant increase in requests from homeowners who are now considering giving up their tracker plans for the first time in over a decade,” she said.

A very standard tracker margin is 1.1 percent.

With the ECB base rate at 2 percent, these tracker borrowers now have an interest rate of 3.1 percent.

Further rate increases are expected.

This has prompted many tracker mortgage holders with just a few years left to mature to stick with fixed interest rates.

“Some fixed rates are now lower than their tracker rates and they are increasingly drawn to the certainty of repayment,” Ms Hennessy said.

Many tracker mortgage holders have a lower loan-to-value ratio and therefore have low long-term fixed rate options open.

Interest rates with a 10-year fixed term of 3.25 percent, a 15-year fixed term of 3.4 percent and a 20-year fixed term of 3.5 percent are now proving attractive.

“However, if you switch from your tracker rate to a fixed rate, almost all lenders will not offer you your tracker rate again at the end of the fixed period,” Ms Hennessy said.

“The decision for tracker mortgageholders is whether they can afford the hike and how far the ECB rate will go.”

Holders of standard adjustable-rate mortgages at the pillar banks have yet to raise their interest rates, but are also subject to rate hikes.

In Ireland, more than 220,000 adjustable rate mortgage holders are currently paying up to 4.5 per cent. If variable interest rates start to rise, those mortgageholders would face increases in repayments, she said.

https://www.independent.ie/business/personal-finance/property-mortgages/homeowners-warned-not-to-panic-as-huge-gap-emerges-in-fixed-rates-on-offer-42159420.html Homeowners warned not to panic as there is a huge gap in the fixed rates on offer

Fry Electronics Team

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