Six fantastic ways to hit a mortgage HOME RUN
…and dodge those new ‘low’ f ixed rates no matter how good they sound!
The European Central Bank has just pledged to cut interest rates from June. This will finally bring relief to mortgage-holders battered by an unprecedented 10 ECB hikes in a row. Adding to the good news this week, AIB and Bank of Ireland also cut fixed and ‘green’ lending rates amid a shake-up of the mortgage market.
Green mortgages, which offer cheaper rates for energy-efficient homes, are now the biggest moneysavers – while BoI also rejigged the ‘cashback’ deals that have underpinned its mortgage offerings for years. There are also new fixed-rate deals. But be warned: these have some ‘stings in the tail’ you need to know about.
So how can we cash in on the new green deals?
Is cashback dead – or can we still grab the money and run?
And how can switchers save without falling into the banks’ cunning traps?
Here are SIX handy hacks that answer these questions and more… and could help you save THOUSANDS on your mortgage.
1. DON’T LOCK INTO A FIXED-RATE JUST YET
Banks are doing their best to tempt us with new ‘low’ fixed-rate deals. The flurry of rate cuts this week involved ONLY fixed rates!
The lowest mortgage deal on the market is now Haven’s 3.45% fixedrate loan followed by several other fixed deals from AIB’s stable (that also includes Haven and EBS).
Next in line in the list of cheapest mortgages are fixed deals from BoI, ranging from 3.6% to 4.25%.
But now is not the time to lock into a fixed rate!
‘My advice at the moment would be go variable rate and when the cycle is over in a year’s time, then look at fixing. Fixed rates will have fallen by then and the variable rates are not that much more expensive than the fixed rates anyway at the moment,’ says mortgage broker Michael Dowling of Dowling Financial in Dublin. ‘So just to give yourself that option if you’re going to fix, do it when the rates are at their lowest.’
2. GET A BER CERT
Up to now, only those with a BER of B or above could get a better deal on their mortgage. But Bank of Ireland has introduced a whole new suite of graded mortgage rates based on BERs A to G.
If your home is newish or wellinsulated, it’s worth getting a BER cert to show your lender, so you can take advantage of the green deals that offer the best value.
It costs around €150 to get a BER for an apartment and €200-€300 for a home. You’ll need one anyway if you ever want sell your property or apply for energy-saving grants.
And in the meantime, it could save you hundreds, if not thousands, of euro a year.
3. GRAB THE MONEY AND RUN
Cashback deals give you back 2%-3% of the mortgage amount as
cash ‘into your hand’. And they are particularly tempting for cashstrapped first-time buyers.
However, cashback comes at a cost because lenders offering this deal charge much higher interest rates. In the latest revamp of its suite of loans, BoI has at last ‘come clean’ about this practice. Its fixed loans are now divided into cashback loans – with a higher rate – and non-cashback loans with a lower one.
The difference between the two is about 0.5%-0.7%, or upwards of €1,000 a year on a €240,000 loan. So if you want to grab the cashback and then switch to a better rate, don’t lock in for too long to BoI’s rather pricey rates.
Cashback borrowers should now go to PTSB, which still offers cheaper cashback deals than BoI, said Mr Dowling.
‘PTSB brought out a new green rate last week – three-year fixed rate – but they’re also still paying the cashback,’ he added.
‘So to me that’s the best of both worlds. What I’m saying to customers is, “Take the three-year fixed
rate green at 3.9%, take your 2% cashback and in three years’ time switch to someone else”.’
4. DON’T HAVE TO ‘WAIT AND SEE’
Borrowers have adopted a ‘wait and see’ approach when it comes to switching lenders as interest rates are finally about to fall.
‘We know rates are going to fall from June onwards. The cycle would suggest there’s 1.25% rate reductions coming from then to, say, October, November ’25,’ added Mr Dowling.
Not all of those cuts will be passed on to borrowers, though fixed rates should definitely come down sharply as the interest rate outlook eases.
But you could also switch to a variable rate with an eye to fixing with your new lender when the time is right.
‘You can go from a variable to a fixed with the same lender and there’s… absolutely no charge,’ Mr Dowling advised.
5. TURBO-CHARGE MORTGAGE SAVINGS
Switching mortgage is the best way to save money – and putting money into your pension is the best way to invest it.
Doing both can turbo-charge your pension. For example, shaving just 0.7% off your loan rate (which is easily done – see table above) would save more than €1,100 a year. If you put that into your pension and got tax relief, you could get an extra €100,000plus in your pension pot.
6. GET ADVICE
Mortgage brokers always advise borrowers to seek their help. Well, they would say that! But it’s actually sound advice. They get paid commission from lenders not from you, so you’ve nothing to lose by hearing what they have to say. Just check how they are paid and how many lenders they can compare for you.