Why it’s not too late to switch mortgages

Aside from tracker mortgages, which are tied directly to ECB interest rates, they can choose or not to pass the change onto their other lending offering, depending on how much they want to keep or attract new customers.

The reluctance has to some extent to do with the recent market contraction. The departure of KBC and Ulster Bank has left just three main players – AIB (owners of EBS and Haven), Bank of Ireland and Permanent TSB. Whoever blinks first gets all the bad press.

The other reason is that many of the existing loan books are already pre-funded; it doesn’t cost you any more.

But customers knew rate hikes were coming, so they were indeed prepared to digest some bad news.

But all three retailers held back on the first and mostly the second rate hike. Now, while they’ve changed their new fixed rates, they’ve left the floating rates intact. It’s an interesting call, but it won’t last.

The rises to come, and at least one more expected this side of 2023, will be more difficult to absorb. For switchers who are still on the fence, it has created a small window for their indecision.

Non-bank lenders are less sensitive. They don’t get cheap, previously free cash from the ECB, but have to source it from other markets. This leaves them open to immediate repercussions if interest rates rise.

Finance Ireland, Avant Money and ICS are the main players here. They have offered banks a viable alternative, borrowing when they arrived, unencumbered by expensive liabilities such as branch networks and thousands of employees, but without the buffer of deposits that is now hampering their efforts to cap interest rates.

Credit unions offer an alternative for some, but on a smaller scale than might be necessary.

So, once again, customers are encouraged to shop around as if transferring your home loan was as easy as switching your broadband provider.

It’s not, and the hassle and time it takes is tied to consumers’ feeling that “all banks are the same” and they might actually go to all the trouble of moving only to find that the New lenders are raising their interest rates as an unwanted gift.

However, the Banking & Payments Federation Ireland reported a 115.8 percent increase in switching and top-up activity in the last quarter and over 175 percent over the last year. People are more anxious than frustrated, and setting rates gives them certainty about spending, at least for a few years.

When they’re in the mood, and in a rising market, they’ll often pay a little extra for a coat of paint or a new sofa, as it’s the last time they’ll get cheap money for a while.

So is there still time? How long will this all take? And where to go?

Pretested

Switchers have a lot to offer. They are essentially “pre-approved” because they have successfully repaid a loan for years. banks like that. They also have a better loan-to-value ratio because they’ve paid off some of it.

On the other hand, they tend to be older – good for income, not so good for time – and their older homes may not qualify for a “green” loan.

A switcher who still has €200,000 left for a €350,000 house and 18-year term can get competitive fixed prices from Avant (2.25 percent, three years), PTSB (2.7 percent, four years) and Haven (2, 85 percent, three years). There is still real value out there, but time is running out. These rates can and will only increase.

Non-bank Lenders (NBL)

Moving to an NBL requires a middleman. They don’t take business directly from the public, so a mortgage broker is your best bet.

Doddl.ie CEO Martina Hennessy has noted that switchers are “very price conscious” and acknowledges that NBLs have increased their fares “significantly” over the past six months.

She adds that they are a “very welcome addition to the Irish mortgage market at a time when the number of bank lenders is shrinking”.

In particular, she cites a more flexible credit policy when it comes to people with variable income. The self-employed, returnees from abroad, or those with seasonal income or stock options will find the banking algorithms more receptive.

They also allow overpayment options to fixed rates and porting rates when moving, along with cascading rate products. That means if your loan-to-value goes down, your interest rate goes down too.

Currently, mainstream banks require you to reapply for a rate change and go through the palavar of documentation and appraisers, and even then there are no guarantees.

However, some transfers may have missed the boat.

“Many of these longer-term interest rates and their benefits have disappeared now that Finance Ireland has stopped lending with fixed maturities over five years,” says Ms Hennessy.

Change made easy

When it comes to switching mortgage providers, give yourself the best chance with these tips from Irish Mortgage Corporation:

time

You must have had your current mortgage for at least 12 months prior to switching, but check anyway.

Equity capital

You must have at least 10 percent equity. If your LTV is over 90 percent, you are not eligible.

Costs

Include appraisal fees and legal fees in your calculations, although some banks offer money for them.

Cashback Incentives

Some banks offer cash or a percentage of the loan back. There is a long-term impact in terms of repayment, as are your amounts.

documentation

Your mortgage lender will require a number of documents including payslips, bank statements and salary

Certificates even if you change your own bank.

break fees

If you have a fixed rate mortgage and are planning to switch, be aware that you may be charged a “prepayment fee” for doing so. It may be better to wait for the rate to go up.

Switching is not quick

You should allow four to six months for the mortgage change. Using a broker can speed things up.

Other Policies

Mortgage protection and home insurance will need to move with your new loan.

consider

Your mortgage is probably your biggest expense each month. Big savings can be achieved by switching!