With the European Central Bank likely to raise its interest rate by as much as 75 basis points later today, BusinessPlus.ie reveals what some brokers advise on mortgage options.
Association of Irish Mortgage Advisors is advising that one result could be that the numbers switching mortgages will grow even faster.
Chair Trevor Grant said: “Switchers could eventually exceed the number of movers, which would be unprecedented. The volume of switching enquiries has already mushroomed since the ECB raised its baseline interest rate by 0.50% in July.
“On the back of the ECB’s announcement, we expect the number of people looking to switch out of standard variable rates, some tracker rates, and even some existing fixed rate contracts with a relatively short period to expiry, to grow exponentially in the coming week and months.”
He pointed out that at present there is little or no cost to breaking an existing fixed rate agreement.
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“While the July increase was the kickstart that many mortgage holders needed to reassess their current terms, an even bigger increase will have thousands more looking for a better deal with their own lender or, more likely, with another lender.
"Switching has been gathering pace for some time now, with increases of 150% and 148% in the volume of mortgage switching in June and July 2022 respectively. There’s significant potential for switchers to increase their share of monthly mortgage activity.
“It is not too late for thousands of mortgage holders to insulate themselves against increasing mortgage costs over the coming months and years. Given the continued growth in inflation, this could be the single most effective savings package available to mortgage holders and they have the power to make it happen.
"People’s current lenders may well offer them the best terms, but it’s worth bearing in mind also that they are not obliged to tell their mortgage customers if better terms are available elsewhere.”
Joey Sheehan of online brokers MyMortgages.ie said that the rate increases from the ECB mean that “every single mortgage holder in the country should be looking at their current mortgage rate agreement to ascertain whether or not they could secure a better value rate, possibly for a longer term”.
He pointed out that while margins on tracker mortgages are in most cases around 1%, some can be as high as 3%.
“Anyone who has a margin at 1% or less should probably just stick with the tracker and someone who has a margin of 1.5% or more should consider fixing,” he added. “In between, it’s hard to call. If your tracker is 2% or higher, you’re paying more already than what you can fix it for before further rate increases.”
With variable rate increases assured in the immediate future, Sheehan pointed out that depending on the size of the ECB increase, borrowers with a €200,000 mortgage with 25 years to run could end up paying as much as €24,668 in extra interest over the term, with a monthly increase from just over €1,000 to just short of €1,100.
