Rising mortgage rates mean the savings that homeowners can make by switching their mortgage have doubled in the past six months.

Mortgage rates being charged by conventional lenders have breached the 7pc barrier for the first time in over a decade.

This means some households may be paying a record of up to €7,000 in extra repayments a year by not switching lenders, according to the latest Irish Independent/Doddl.ie mortgage switching index.

At the start of this year the maximum savings to be made from switching were around half the current amount, at around €3,590. Higher European funding costs have prompted a string of mortgage-rate rises from the main banks and the non-bank lenders.

The index is based on the average new mortgage drawn down in the last quarter of almost €300,631 and a highest roll-out variable rate of 7.15pc versus the lowest standard rate on the market.

The lowest non-green mortgage rate in the market is currently a three-year fixed at 3.85pc from Avant Money.

The 7.15pc rate is the one Finance Ireland customers are on coming off a fixed rate roll to when the fixed period ends.

Vulture funds are charging some of their customers even more, but do not offer new loans or facilitate switches.

The gap between the highest and lowest rate on the market is now 3.3 percentage points, the quarter three edition of the index shows.

Doddl.ie managing director Martina Hennessy said there are even cheaper rates available for those eligible for green rates or who have lower loan-to-values (LTVs).

Despite bigger savings to be made by switching, there has been a big fall-off in switching activity this year.

“People fear that they have missed the mythical boat, but the reality is that the repayment gap is widening, and it is now more important than ever to review your mortgage rate,” said Ms Hennessy.

“Fear of selecting the wrong options means that we do not act at all, and remain paying needlessly high rates of interest on our biggest outgoing.”

She said the pillar banks were initially slow to pass on rate increases, but this has changed and we continue to see rate increases throughout the market.

“The non-bank lenders, who were immediately impacted by rising funding costs, have more than doubled their rates in less than two years,” she said.

The Doddl.ie boss said the last time we had this higher-rate environment, between 2006 and 2008, people couldn’t switch as LTVs were dropping.

We are in the opposite place now and the homeowner’s hand is very strong, she said.

Due to property price inflation most mortgage holders rolling off fixed rates will have an improved LTV and will be eligible for lower rates due to their stronger position.

“With normal payback and in an increase in house values, even mortgage homeowners who purchased three years ago at 90pc loan-to-value may be below the 60pc threshold now and be eligible for sub-4pc rates,” said Ms Hennessy.

The mortgage adviser said it was important that mortgage holders question what interest rates are available on the market and not just settle for the rate offered by their existing bank.

She said the majority of those switching mortgage do so with the assistance of a mortgage broker.

Source: Charlie Weston, Irish Independent 6/11/2023