Switching Mortgage Provider to Save Money
With the Irish Independent putting out headlines like “Mortgage Hike Shock” - some people may be thinking of moving their mortgage to another lender - especially PTSB mortgage holders.
If PTSB do raise their variable rate by 0.5% as predicted - they say the “average” rise in repayments for PTSB variable rate mortgage holders will only be €15 a month - because the avergage outstanding mortgage is just €62,000.
The mortgage broker industry is urging people to go on to a fixed rate mortgage - but of course they may be slightly influenced by the possibility of increased work for themselves if people switch lenders.
Switching your mortgage lender will involve legal fees and valuation fees of anything between €600 and €1500 - depending on the solicitor you use. The legal work involved is not as much as buying a house - but it still has to be done properly.
If you still owe more than 90% of the value of your house - it is unlikely that any lender will want to take on your mortgage .
Switching to another lender’s variable rate is probably not worth the costs involved because other lenders may well put up rates soon too.
Switching to a fixed rate will save you money if it is lower than your variable rate. Switching to a fixed rate that is higher than your current rate is more of a gamble and it may or may not pay off. There are still fixed rates on offer as low as 2.8% (AIB) and 2.99% (BOI) for switchers. But these rates are only for 2 years - and the savings you make may not even cover the legal fees if your mortgage is not very large.
See the Lowest Mortgage Rates here.
For example a 250k loan over 25 years at 3.69% would mean repayments of €1278 a month. Switching to a 2 year fixed rate of 2.99% would reduce the repayments to €1185 - a saving of just €93 a month. (If variable rates rise again during the 2 years your savings would of course be greater.) So you would save a minimum of €2232 over the 2 years on repayments - but the switching costs could use up around €1000 of this. It is worth considering though.
A 100k mortgage would mean reductions in repayments of just €37 a month (€888 total) - so it may not be worth switching lenders for those type of savings - unless just as a protest.
Of course - variable rates could come down during the next 2 years - but that is not looking likely in the short to medium term.
NB: Bank of Ireland are still offering to pay up to €750 towards legal fees for switchers - but this offer is due to end soon