Is it worthwhile switching my mortgage due to rising interest rates or should I stay put?
Q I was thinking of switching my mortgage as the interest rate has increased a lot in the last few months. Is it worth my while as I hear interest rates have risen across the board?
A HOMEOWNERS are often reluctant to revisit their mortgages and shop around for a better deal. Thousands of Irish homeowners are needlessly paying thousands of euro each in extra mortgage repayments each year and are totally unaware of it because they haven’t bothered to look into switching providers.
You know that moment of realisation when you look in your bank account at your various bills and you think to yourself, how on earth did I end up paying this amount of money? So, what do you do? Do you think, sure everything is going up, it’s too much bother to switch, or do you get on the phone to your provider and have a little moan? They then either give a quote that’s far more appealing than what you’re paying now, or you walk.
The recent spate of interest increases has not encouraged consumers and the level of people shopping around may have even decreased in the last few months. We have an inertia towards our mortgage. With higher interest rates the fear of the unknown has increased, making this issue even worse. In fact, it makes more sense than ever to review your rate now. When rates are rising or sitting at a high level, you need more security over payments than you did when rates were low. Switching may not be straight forward, but it is far easier and more cost-beneficial than you think.
So why should you switch?
In short, you may save a lot of money. There is a massive difference between the highest and lowest available rates.
Every bank has niche products that follow standout rates. Rising interest rates have made it more important to seek out those rates. For example, green mortgages offer reduced rates for customers with a BER rating of B3 or higher.
The best current green rate at 3.45 per cent fixed for four years versus their standard variable rate, which is 4.15 per cent, the difference between those two rates on a €250,000 mortgage would be over a 25-year term is 95.52 euro per month or €28,656 over the 25 year term.
If you don’t have a ‘Green House’ you may also be able to avail of cheaper rates, if you are borrowing less than 60 per cent of the value of your house, or for larger mortgages (over 250k) for example. So, there is value to be sought even though rates have increased significantly. Aside from sparing your own finances, switching can help others save as well. Being complacent means banks have no reason to offer competitive rates – meaning our collective failure to shop around is costing us all.
How do I switch?
Firstly, if you don’t know already, ring your bank and find out how much is still owed on your existing mortgage, how long is left in your term, and the interest rate you’re currently paying. Any potential provider will need all this information. After that, go to a Broker to seek out the most optimal rates and help you to understand what’s on offer. They will be able to take all your information and find out the best available rates and recommend one based on your exact requirements.
When should I switch?
Now or as soon as possible is the best time to at least explore your options. It may be better to wait, or your existing provider may have a better rate without switching, but you need to ask the right questions. If you do decide to switch, the entire process of switching mortgage can take about six to eight weeks but switching has never been easier.
Brokers and banks have become far more digital in engaging with you, so you don’t have to take time off to go to meet with your bank, you don’t have to go to an office to fill out paperwork. You can have a Zoom call that gives you all the information you need to allow you to switch and make an informed decision.
Finally
Some clients have said to me that they had such hassle getting a mortgage in the first place that they couldn’t face going through that again, but your mortgage is your biggest financial commitment – you have to take charge. It is the one thing that you reduce significantly by researching and switching where it makes sense to do so.
The good news is that remortgaging is not as stressful as getting a new mortgage so don’t be scared of your mortgage. Manage it.
This article aims to give information, not advice. Always do your own research and/or seek out advice from a Financial Broker before acting on anything contained in this article.