Mortgage Rates Ireland

With variable mortgage rates now available at 3.25% - many borrowers who took out fixed rate mortgages rates in 2007 or 2008 at rates of up to 6% will be thinking of trying to move off their fixed rate. But how easy is it and how costly can it be?

Many first time buyers took out 5 year fixed rate mortgages in 2006 or 2007 because it allowed them to borrow more. Many brokers tried to get business by obtaining the highest loan possible for clients. Lenders and brokers were supposed to ensure that borrowers could afford their repayments if ECB rates rose by 2%. But - this “stress test” did not have to be carried out on fixed rates of 5 years or more. That is why so many 5 year fixed rate mortgages were taken out. So we have these homeowners who are probably in houses that have dropped in value and on mortgages that they can only just afford.
Someone on a 250k 5.5% fixed rate mortgage over 25 years taken out in 2007 will be paying €1535 a month. If they were on the lowest variable mortgage (see latest rates here) of 3.25% - they would only be paying 1227 a month. That is a difference of €308 a month - a significant amount. ( just under €4000 a year)

It could be a good idea to ask your lender to let you break out of the fixed rate - but in most cases there will be a penalty - as laid out in the original mortgage agreement. Ask them what that penalty will be.
Some lenders have a breakage charge of 6 months interest or 3 months interest. Others use a formula based on the amount borrowed and the difference between the fixed rate and the current variable rate. These calculations can be very complicated - but essentially you are paying the lender the agreed fixed rate they would have received until the end of the contract minus their current funding rate, which is probably close to the ECB rate of 2 per cent.

You should contact your lender immediately and ask them how much it would cost you to close out your fixed rate contract and switch into a variable mortgage. It shouldn’t take much longer than one working week for this information to be available from an efficient lender. If the bank is taking an unreasonable length of time to reply, you can call the Financial Regulator on 1890 777 777 .

Once you have the figures available you can work out if it worth breaking out of the fixed rate. It may be even more cost effective to move to a lender with a lower variable rate. Some lenders are still offering to pay at least 1000 euro towards legal fees (BOI, Halifax and possibly AIB)
The problem for many homeowners who took out 100% mortgages - will be that price reductions now mean that they owe more than the value of the house and lnew enders will not want to deal with them.