The value of mortgage switching in Ireland jumped by 45% last year as the European Central Bank started to bring down interest rates.
Figures from Doddl.ie shows that over €331m in switching financing was drawn down in the fourth quarter, up 14% from the previous quarter and 45% from the same period in 2023 (€228m).
Since the ECB started cutting rates from a high of 4% last may, some banks have reduced their lending rates by as much as 1.5 percentage points. Doddl.ie also highlighted the entry of digital-first lenders into the Irish mortgage market for the surge in switching following a couple of down years.
“The number of people who can now save big by switching has increased as lenders increasingly reward those owning more energy efficient homes and mortgages with lower loan to values,” said Martina Hennessy, CEO of Doddl.ie.
“And now new entrants like MoCo and Nua Money are starting to really shake up the market. These broker-only lenders are slashing mortgage approval times from weeks to hours - which is a real game changer- and just last week Nua Money announced rate reductions of up to 0.75 per cent.”
New figures from Banking & Payments Federation Ireland (BPFI) show an 18% annual increase in personal lending for home improvements.
The market has also seen continuous double-digit property price inflation, which has given homeowners access to better rates based off lower loan-to-values when switching their mortgage.
The gap between the highest and lowest rate on the market is now double, with the lowest rate currently standing at 3% and the highest rate at 6.15%.
Switching has become a core product for lenders, and seven lenders now offer cash back switcher packages to cover legal costs associated with switching, according to Doddl.ie.
“When we started the Index five years ago, the average switching time was eight weeks. However, this has changed completely with one of our recent switches being completed from application to draw down in 10 working days,” said Hennessy.
The Q4 Doddl.ie Mortgage Switching Index found a €7,189 difference in annual payments between the highest and lowest mortgage rates currently available.
The index is based on the average new mortgage drawn down in the last quarter of €334,184 over 25 years. Potential savings amount to €599 per month due to rate variations across the market.
For those who do not have a tracker rate, the company said is important to be aware that ECB rate cuts may not lead to corresponding cuts by the Irish lenders who price off Euribor rates and not ECB rates.
Pillar banks will have already priced in forward rates in their cuts over the last three months and the rate curve is at or near the bottom of what is expected, according to Hennessy.
“Lenders at the top of the scale may drop their rates but lenders who are currently at and close to 3% may have very little room to continue cutting,” said Hennessy. “This means it is likely to be competitive forces – driven by consumers switching and lenders vying for market share – that impact further rate cuts, rather than funding costs.”
Photo: Martina Hennessy, CEO, Doddl.ie (Pic: Supplied)
