Home-owners are needlessly paying an average of more than €4,000 a year extra by not switching mortgage lenders, a new study has found.
The latest doddl.ie mortgage switching index found that borrowers are missing out on average savings of €4,175 every year.
Now a mortgage expert is urging them to capitalise on potential savings by scoping out the competition.
Most people do not know the mortgage rate they are on, according to doddl.ie managing director Martina Hennessy.
Increased competition has meant that savings indicated by the index have grown by €735 in the past six months, as the gap between the highest and lowest rates on the market widened to 2.55 per cent.
This means a saving of €135 per month for every €100,000 owed on a 25-year mortgage.
“With mortgage statements being issued this quarter by all the lenders, this is the perfect time to see if you can get a better rate and take advantage of these considerable savings,” Ms Hennessy said.
“Irish mortgage-holders generally pay up and, for the most part, don’t question the interest rate they are charged.
“The average new mortgage rate in Ireland in Q4 2020 was 2.79 per cent, the lowest mortgage rate is currently 1.95 per cent.
“If your mortgage statement reflects a higher rate you should check to see if you can save by switching.”
There are still more than 200,000 households repaying their mortgage on standard variable rates of up 4.5 per cent, whereas the lowest available rate on market is now a fixed 1.95 per cent.
The index is based on the average mortgage drawn down for new lending in both the first-time buyer and second-hand mover markets, which as of the fourth quarter of last year was €258,829.
While the index measures the average savings available nationwide, the gap widens significantly in the country’s prime property locations.
The average home-owner in a three-bedroom semi in Dublin city at Q4 2020 could potentially save €455 per month, or €5,460 per annum, based on a 90% loan-to-value mortgage and a rate of 2.3 per cent over 25 years on an average house price of €431,833.
Despite the significant savings that can be made by switching, the number of Irish households doing so remains low.
The latest Central Bank report on mortgage switching recorded that 61 per cent of eligible switchers could save some €10,000, while 13 per cent stand to gain more than €30,000 in present-value terms.
“Many home-owners don’t really think of their mortgage as something they can take control of,” said Ms Hennessy.
“Your mortgage statement contains your mortgage balance, interest rate and monthly repayments.
“A simple online search or a call to a broker like doddl.ie can help you understand if you can save by getting a better rate and switching provider.
“If you can, then do. Why would you pay more than you need to on your mortgage, as it only benefits the banks?
“We all place huge value on the security our homes offer us, and rightly so; however, we have to stop thinking of our mortgage as our home.
“Switching your mortgage should have no other emotion than satisfaction that you have taken control over what is for many their largest financial commitment.
“Sticking with a lender who is charging you a higher rate than what you can achieve from other lenders does not make sense.
“Interest adds no value to your mortgage so reviewing your mortgage at regular intervals to assess if you can save by moving to a better rate is one of the most prudent things you can do.”
