Irish mortgage holders face a huge overpayment of €16,000 if they make the wrong rates decision with their next move.
Experts at doddl.ie have warned that householders rolling off fixed rates could be needlessly overpaying almost €16,000 in the next three years on the average mortgage if they do not make the right choice about their next move.
The gap between the highest and lowest new fixed rates on the market has widened to a high of almost 3%, the doddl.ie Index has found.
Read More: Sligo grandmother 'knew killer and let him into house' as garda probe ramps up
Over 90% of new mortgages are on fixed rates, the vast majority with durations of five years or less, leaving the Irish mortgage holder exposed to rate increases.
Managing Director of doddl.ie, Martina Hennessy, has urged mortgage holders not to take a wait-and-see approach as rates continue to rise.
“Your mortgage is your biggest outgoing and, generally, if you switch, you save. There is still value in the market, but you must do your research or get market-based advice to ensure you find it,” said Ms Hennessy.
“Rates have increased but it still makes sense to switch as there are still large differences on rates offered between lenders.
“The lowest rate on the market is now a three-year fixed rate of 3.25% while the highest three-year fixed rate for the same loan to value is 6.2%.
“The difference in monthly repayments between the two for a €250,000 mortgage is €443 per month, which equates to €15,948 over a three-year fixed term.
“Many of the best rates on the market are available from lenders who only deal with brokers, so by not doing your research and using a broker you are effectively rolling the dice on your finances.
“And with nine lenders in the market, without advice, the chances are you may not land on the right option.”
The latest doddl.ie Mortgage Switching Index reveals that mortgage holders on the highest variable rate could save up to €3,587 per annum by switching their mortgage.
This is based on the average new mortgage draw down in the last quarter of almost €282,000 and a roll out variable rate of 5.15% versus the lowest non-green rate on the market – currently 3.25%.
The index is based on the average mortgage drawn down for new lending in both the first-time buyer and second-hand mover markets as at Q1 2023.
Homeowners emerging from fixed rates or on variable rates are in uncharted territory at the moment and are being faced with rises in repayments that they haven’t budgeted for.
“It is important that those currently on a fixed rate get ahead of upcoming rises and shop around before accepting a fixed rate from their existing mortgage lender,” said Ms Hennessy.
“You might be paying more when you roll off your rate, but you will still save by switching as opposed to accepting the first rate on offer.
“For example, your bank may offer you a 4.5% five-year-fixed rate, but a broker will secure a similar term at 3.75% if you are at 80% loan to value.”
The market now predicts that funding curves will peak at 4% in late 2023, indicating that mortgage lending rates could rise to over 5%.
Mortgage holders who locked into fixed rates averaging 2.5% even up to 12 months ago could be faced with equivalent rates of up to 6.25% when they exit their current deal.
Recent ESRI research found that 46% of consumers did not compare offers on mortgages, despite what the study found are differences in interest payments that can add up to tens of thousands of Euros.
READ NEXT:
Late Late favourite Patrick Kielty's wife hints at move to Ireland if he lands job
The Monk in bid to force State to pay €400k he forked out to win murder case
Met Eireann issue Status Yellow thunderstorm warning for six counties
Notorious Limerick gangster Ger Dundon could walk free from jail in just 6 years
Bruce Springsteen delights as he pops out for pint and fish and chips in Dublin
Get news updates direct to your inbox by signing up to our daily newsletter here
