Want to switch mortgages in Ireland?

By switching your mortgage, you can save a lot of money. Mortgage is most likely to be the biggest household expense for many years, so this bill is one that most people do not want to overpay on. Therefore, just like any other bill, you should always opt to switch your mortgage every few years so that you can be sure that you are not overpaying.

Without a doubt, you could save a lot by switching mortgages. If you have a mortgage with a balance of €250,000 and are currently paying 4.5 percent standard variable rate, and have a minimum of 20 percent equity in your home, you could save approximately €300 each month by switching to the most affordable on the market. This translates to a lot of savings. Despite the fact that there are certain upfront costs linked to switching providers, banks can offer cashback to the individuals who switch. 

Every financial institution has its unique set of criteria for allowing its customers to switch their mortgage. In the event that your financial situation has changed negatively since …

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Mortgage switching: how, when, why

What does it mean to switch mortgages? Why would someone want to switch? What can be gained from switching? Finally, if one wants to switch, how should they go about doing it?

The first question is easy to answer, though oftentimes “switching” can get conflated with “remortgaging.” Don’t be fooled; these refer to two different things that, while similar in concept, can have different implications for the borrower.

“Remortgaging” simply refers to getting a new mortgage to replace a previous one; this can be done with one’s existing lender or a new one.

“Switching” is the process of taking one’s existing mortgage and moving it to a new lender.

Now, for the next question: why would a borrower want to switch mortgages? There are a number of reasons for doing so. Firstly, a borrower might be dissatisfied with their current lender for one reason or another, like poor service or lack of responsiveness to inquiries. If borrowers think another lender will provide better service, tat would be a good reason for switching mortgages to said lender.

Another reason for switching …

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Types of mortgages and lending rules

Irish law has specialized sets of lending rules depending on the type of mortgage application. Types of applications are split into three different categories: first-time buyers, remortgaging or switching, and buy-to-let buyers. Depending on which of these categories an application falls under, different loan-to-value (LTV) and loan-to-income (LTI) limits will be used. The former refers to the minimum deposit a borrower must have on a home before getting a mortgage loan. The latter refers to the maximum amount of money borrowers can receive in relation to their yearly gross income; while this is normally capped at 3.5 times one’s income, lenders can provide additional allowances of varying amount depending on the type of application.

Firstly, there are first-time buyers. These applicants are those buying a house for the first time, so the deposit required by LTV limits is understandably less steep. They will need to have a minimum deposit of 10% of the home’s total value. For example, if the price of a home is listed as €250,000, a 10% deposit would amount to €25,000. Lenders are allowed to have …

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Ulsterbank fire the next shot in the mortgage ‘rate-war’

Ulsterbank recently upped the ante in the mortgage rate-war by reducing a suite of their rates, the story was covered in the Independent which also quoted Irish Mortgage Brokers.

Karl Deeter said the cuts represent the latest shot to be fired in the mortgage rate war.

“In response to Avant Money’s European-style rates, Ulster Bank has had to respond and now it means that other lenders are under even greater pressure to follow or beat these rates.”

He said this means customers will win. But they have to switch lender is they are paying high rates.

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Mortgage Switching is More Common than Central Bank States

Competition between mortgage providers has increased dramatically over the past couple of years. People are switching more frequently than every before trying to find the best mortgage rate for themselves. Over the last three years, the percentage of mortgage holders prepared to switch providers has doubled according to a banking sector report. Additionally, these figures are higher than what the official figures from the Central Bank are. Also, the Irish Banking & Payments Federation (IBPF) marks the rate of switching at over 15% which compares to the slightly more than 1% rate that the Central Bank has pit forward.

The federation suggests that the much lower calculations from the Central Bank could have a negative effect on how willing consumers are to search around for value. The IBPF notes the difference in numbers is caused by the Central Bank using the number of mortgages being switched as a percentage of total outstanding private dwelling house credit. IBPF stated, “This gives rise to a figure of less than 1 per cent for the current level of mortgage-switching activity” and “Crucially, this …

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The future is refinancing

Getting a loan can be extremely hard to achieve, especially in today’s Irish economy. With higher interest rates than usual, many people who have successfully gotten a loan may be looking for an opportunity to refinance in a few years to come.

Refinancing would not be beneficial for those people who are repaying loans. This is largely due to the banks uncertainty as the Brexit date draws closer. Banks are afraid that there will be an economic crash that will leave people with loans unable to pay the banks back at their projected rate. These fears are outwardly displayed in the form of high interest rates and low amounts of accepted loan applications.

The current interest rates rely heavily on the type of loan that you are receiving, but can vary significantly. The most common forms of loans are mortgage, auto, and personal. In any of these agreements, the interest rates are high in comparison to previous years.

Refinancing in the future may be key for many of the people who are currently being approved to take out …

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How to knock €138,000 off your mortgage?!

This was an interesting piece by Louise McBride in the Sunday Independent. The assumptions were based on a fairly hefty mortgage figure, but the general idea remains strong, that if you get a lower mortgage rate you can save money.

Our contribution was to say that in an ere of low interest rates and with rates falling that “The banks all know that interest rates are coming down – and that one way to kill the switcher market is to get more people onto fixed rate mortgages,” said Karl Deeter of Irish Mortgage Brokers. “Banks are playing a defensive game. They’re not competing on variable rates – they’re competing on fixed rates instead.”

To us this is simplistic but also true, if banks fear attrition of their performing loan book the best thing you can do is take high variable margin from those willing to pay it, or who aren’t bothered by it (as is common with older loans) or to defend your position by locking in potential switchers seeking value by offering them value in return for commitment …

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Irish Times mentions Irish Mortgage Brokers on ECB rate move

The Irish Times mentioned Irish Mortgage Brokers in their story by Arthur Beesley and Eoin Burke-Kennedy on the rate cut by the ECB from 0.05% to 0%. The implications for borrowers are minimal, it’s more about ‘signalling’ to the market, the good news for debtors is that rates look set to stay low, which is awful news for savers.

“Mortgage broker Karl Deeter said monthly repayments on a 25-year €200,000 loan would drop by €5. The refusal of Irish banks to pass a succession of ECB rate cuts to variable rate mortgages has long been contentious.”

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Independent Newspaper mentions Irish Mortgage Brokers

In an article today about mortgages by John Cradden of the Irish Independent we were quoted extensively regarding our thoughts on loans, extracts are below:

Last month saw the official launch of a new mortgage lender here in the form of Australian firm Pepper, who will be lending to the self-employed and those who got into arrears during the downturn but are now back on track.

“Up to now, if you had credit issues you were virtually unbankable, that is set to change,” said Karl Deeter of Irish Mortgage Brokers. “Equally, as banks add bells and whistles to their product suite, you’ll see some will be about flexibility rather than price and that’s a sign of competition in product differentiation coming through.”

He adds that rates will improve with the new competition. “This was what happened in the last credit cycle and will happen again so time will take care of that, but Ireland also has unusually high risk associated with our loans so that has to be factored in.”

The cashback offers are another popular incentive, with …

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One Big Switch findings on mortgage holders

There was an interesting infographic out today from One Big Switch showing what people have done in order to make their mortgage repayments.

It ranged from working extra hours, to taking fewer holidays and socializing less. What is interesting about this, is that nobody tends to look at the wider economy effects of high mortgage rates, and the Central Bank while saying they want to examine them, cannot and will not do anything about it.

Higher rates act like an informal ‘tax’, and as some banks are foreign owned it means taking income out of the Irish economy and funnelling it elsewhere, this affects our balance of trade and was a reason we always questioned the Patrick Honohan diktat of not having an issue if all banks were foreign owned.

This informal tax reduces expenditure in the productive economy and goes towards rationalizing zombie balance sheets, so lower rates should be a priority for everybody, but the way to get there isn’t force, it’s competition and for that reason we are hopeful that the switching campaign will be a successful …

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