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Index shows rate of mortgage switching has more than ‘trebled’

Index shows rate of mortgage switching has more than ‘trebled’ managing director Martina Hennessy said the average city homeowner could save €2,595

THE average Limerick city homeowner is “needlessly paying an average of €2,595 in extra mortgage repayments per year by not switching lenders”, the latest  Mortgage Switching Index has found.

The spread between the highest and lowest interest rates available on the market has now grown to 2.2% or €216 per month in terms of monthly repayments for the average three-bed semi-detached mortgage in the county.

This gap between repayments on the lowest mortgage rate at 2.3% and the highest at 4.5% is now 27%, meaning that some homeowners are needlessly paying twice as much interest on their mortgage “at a time when switching has become easier than ever”.

The rate of mortgage switching has more than trebled in the past four years, the index shows.

“Mortgage holders need to optimise their rate and terms, especially at the moment, and the impact of lower interest rates is hugely significant,” said managing director Martina Hennessy.

She said sticking with a lender who is charging you a higher rate than you can achieve on the market “does not make sense”. 

“These average savings of €2,595 per annum in Limerick city are interest savings and interest adds no value to your mortgage.

“Current bank switching packages have also removed the previous deterrent of cost in switching mortgages,” said Ms Hennessy.

She continued: “In most cases financial institutions will provide a lump sum amount, once the new mortgage is drawn down, which generally covers any transaction fees involved in switching.

“These switcher packages range from €1,650 up to 3% of the mortgage amount outstanding back in cash.

“With such choice on the market with regard to rate and cashback offers it is important to get impartial advice to help you understand all available options available to you with regard to mortgage switching rather than directly responding to a marketing message from an individual bank.”

The highest rate of repayment on the average 25 year mortgage is €1,025, while mortgage holders on the lowest rate are paying €809 per month.

The index is based on a new lending 90% mortgage of €184,500 drawn down on the average three-bed semi-detached house value of €205,000 in Limerick city.

The doddl index looks at the total number of switcher transactions per quarter as a percentage of all home loan transactions, excluding Buy To Let mortgages, to give an accurate picture of principal private dwelling house credit.

Compiled by impartial mortgage switching experts, the index highlights the differential between the lowest and highest non-discounted interest rates on the market – and the potential savings available.

Mortgage switching transactions represented 14% of home loan lending at year end 2019, this percentage up from 5% in Q4 2015 when the market for mortgage switching started to open up again.

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