Will switching your mortgage save money?

The best deal when you take out your mortgage may not be the most competitive for the lifetime of your loan. Mortgage rates are falling – the European Central Bank (ECB) announced its seventh cut last month, so now is certainly a good time to see if there is a better rate out there. There is also increased competition in the market with the recent entry of MoCo, owned by Austrian bank BAWAG, and the fact that over 70 credit unions now have a mortgage offering. Revolut is due to shake things up further when the online bank starts offering mortgages here in the coming months.

For most people, the mortgage payment is the single-biggest financial commitment in a household, and if you can avail of more favourable terms, that’s one of the main reasons why people should consider the switching process. So says Trevor Grant, director of Affinity Advisors and chairperson of the Association of Irish Mortgage Advisors.

“A lot of people are coming off fixed-rate mortgages this year and next – tens of thousands – and for many of them, they will be moving onto higher rates, so when they would have borrowed money three or five years ago, the rates were lower.

“They’re moving onto higher repayments, and again, it’s an ideal opportunity to make sure they can get the best deal on the market.”

Another reason to think about moving your mortgage to another lender is if you are considering home improvements or a new extension. Green mortgages for houses rated BER A and B may not have been available when you first took out your mortgage, or you may have done improvements to your property to make it more energy efficient which means you may qualify for a lower interest rate.

Research by the Central Bank of Ireland shows over 60% of the switched mortgages cost in excess of €10,000 less over the course of the term of the loan.

Despite this, switcher rates are extremely low. While Trevor says the numbers rose during the pandemic, they fell again a short time later. “The switcher market in Ireland grew significantly during Covid, but from July 2022 to October 2023, there was practically no switching. The reason for that was rates were increasing, and people were nervous about jumping ship because they thought by the time they remortgaged or switched, the rates would have gone up again, so they stuck with who they were with.

“Since rates have started to come down in the last six to nine months, the percentage of people switching is increasing,” he points out, attributing the historically low switching rates in the past to inertia and fewer switching products.

For example, if you move, you’re going to save €5,000; it’s going to cost you €2,000 to switch, so you’re saving €3,000 over the period

First steps

The reality for most people though is switching mortgages is a lot of work. Many remember what is involved to initially take out your mortgage.

While it is not quite as labour intensive, it is still time consuming. You need to review the market, consider breakage fees if your current mortgage term isn’t up, get your property valued and engage a solicitor.

If the savings are going to be worth it, and you decide to go ahead, Trevor advises as a first step, you should be “financially aware” and contact your existing lender to see what your interest rate is and will they offer you better terms?

If they say yes, that’s a good indicator there are even better rates elsewhere.  However, you need to weigh it up.

Both ccpc.ie and switcher.ie also have good advice and online switcher mortgage calculators that will do the sums for you. You will need to have your mortgage term, remaining amount, rate and loan to value figures to hand.

If you’re switching, it could be worth looking into a broker. They can provide market-based advice and take you through all of your options and coordinate the process. The majority of switching in Ireland is now done through brokers.

Similar to banks, many brokers now have a secure portal so you can log on and submit your documents. What has changed in recent years is that many brokers ask for “reduced documentation from switchers” because they have already shown an ability to repay.

“Look, if you can save up to €5,000 over three or four years, it’s worth the bit of heartache of having to go off and get the documents and do a bit of grunt work because, obviously, financially, it makes sense,” says Trevor.

While a solicitor is necessary to switch, he says there are new conveyancing firms that specialise in this service, which can be cheaper.

“The key in most cases is that the lender looks to contribute to the cost of switching,” says Trevor. “It should negate fully or partially the cost of getting a new valuation done and engaging a solicitor, and obviously that cost should be taken into consideration when you’re calculating the potential savings of switching.

“For example, if you move, you’re going to save €5,000; it’s going to cost you €2,000 to switch, so you’re saving €3,000 over the period.”

Ducks in a row

Once the the application is submitted to the lender, you could be approved somewhere between five and 13 days, barring delays according to Trevor.

“It’s possible if you get all your ducks in a row, from the date the application is sent off, to close in four to six weeks,” he says, adding that brokers don’t generally charge a fee for switchers.

The brokers are remunerated by the lenders, and each financial institution pays the same rate, eliminating any chance of financial bias. However, it is important to ask the broker whether they work with all banks to get a fair assessment.

See irishmortgageadvisors.ie; ccpc.ie, switcher.ie