How long does it take to switch your mortgage?
Don’t hold your breath, but we may finally have a chink of light at the end of the European Central Bank’s monetary policy tunnel – which has been ascending since July 2022.
Its job is to keep inflation at 2pc – but at one stage it hit five times that, launching 10 successive interest rate hikes, which hit Irish mortgage holders in the gut.
Although our banks largely held off imposing the first few increases (it’s not a good look – and anyway, they were hoovering up profits from depositors), there came a time when they couldn’t hold that stance any longer.
But when can we expect to begin the journey downward? And what does it mean for your home loan? Is it a game of stick or twist?
In its quarterly bulletin, issued this week, the Central Bank was doing both.
“A continuation of declining price pressures for energy and non-energy goods is expected to reduce headline inflation to 2pc for 2024, then 1.8pc for 2025 and 1.4pc for 2026,” it said.
“More persistent domestic price pressures – as reflected in services inflation – are forecast to result in core inflation exceeding the projection for headline inflation out to 2026.”
Mike O’Sullivan, strategist at Unio Wealth says: “The moribund German economy is one of the key factors [behind interest rate cuts], and with inflation appearing tame for now, it is likely we will see lower rates over the next six months.”
Further speculation is pointless, and even if rates begin to drop in the summer as is widely expected, it will be mid2025 before the cycle is reversed – and even so, it’s unlikely we’ll ever witness 0pc rates again.
For the estimated 100,000 mortgage holders whose fixed rates will mature in 2024, many will be moving from historically low rates to an increase of 1 to 2.5 percentage points, and, in extreme cases up to 4pc, according to Trevor Grant, chair of the Association of Irish Mortgage Advisors (AIMA).
So when that notice thuds through the letterbox, it’s best to be prepared.
“It is very important to investigate your options early, as you may well need to get ‘mortgage ready’ to switch lender. This means that you might have to adjust your financial activity for some time before submitting your new application,” he says.
“The alternative is to do nothing and just accept whatever your existing lender offers upon maturity. But mortgage holders who choose this approach could end up paying a hefty price.”
Most commentators seem to believe fixing a new rate now is a bad idea, except for first-time buyers who prefer the certainty of outgoings.
By fixing, you would be locking in at the top of the cycle. You may have the option to move onto a variable rate, albeit an expensive one, while you wait to see what happens.
Those coming off a fixed rate must be sent notice of their options in writing, telling them of current fixed and variable rates, based on the then outstanding mortgage balance. This will arrive up to 30 days before a decision needs to be made.
If you’re meeting your repayments comfortably or have a small mortgage, including an old tracker, than staying put may be the best bet. Needless to say, if you fixed before July 2022, than hang on until you absolutely are compelled to take action.
Sticking with your own lender, while switching mortgage is also an option. You have a better loan-to-value ratio now, perhaps you got a promotion, or are earning more. Either way, asking your own lender for a better deal to avoid you switching bank may compel them to take a new look at your circumstances.
There’s no point gilding the lily; switching mortgage is a pain. It involves reams of paperwork, lots of back-up data, and
How long is a piece of string? When it comes to switching your mortgage, less is never more.
Many mortgage holders can erroneously believe they are in a different category to a brand-new applicant – because they’ve been diligently paying off their loan, so they think they are effectively “pre-approved”.
But every application is treated with the same due diligence. This is for legal reasons and also because of Central Bank rules.
“The biggest delay when switching
If the ECB interest rate is going to fall soon, then it may not be a good idea to fix a rate. But on the other hand...
a keen eye on what offers are available. That can make it too much bother for many people.
“Switcher numbers were well down in 2023 from 2022,” says Mr Grant. This is because many potential switchers locked in rates once the upward cycle began.
“Activity on the ground this year has been very strong, with a significant amount of mortgage holders contacting brokers in advance to understand their market-based options for when their fixed rate matures in 2024.”
Even so, they can expect increased stress levels for three or four months while it plays out – an effort Mr Grant says can be seriously worthwhile. is often the length of time it takes your solicitor to get the deeds from your existing lender, so it’s always best to commence this process as soon as possible,” Trevor Grant says.
“Before instructing your solicitor, you should get a written quote confirming the fees involved.”
Some banks cover this cost, but only to a certain amount.
“If your application is presented properly and in full to your lender, and if it is processed within the Central Bank timeframe guidelines (13
“Many lenders offer incentives to switch,” he says, citing Haven and AIB’s €2,000 to move if you have a green property. That’s nothing to do with St Paddy’s Day, it means you must have a BER cert A1-B3. Indeed, green loans are great value if you qualify and he cites 3.65pc for four or five years fixed, as being available.
“Many lenders offer cashback, but do your due diligence – most cashback offers come at a price, with better rates and product flexibility existing elsewhere.”
Using a broker means access to the full market. Not all lenders will lend to all mortgage customers. For instance, Avant, Haven and Finance Ireland only sell through dedicated broker channels. working days), plus if there is no delay in the deeds being released, then you should be able to close within four to six weeks from the date of submission,” he adds.
Documents required for switchers include one recent payslip, a P60 or tax-balancing statement, and a salary certificate. You will need to provide three to six months of current account statements (for all accounts), credit card statements, a recent mortgage statement and the application form itself.