Homeowners can be needlessly paying an average €4,097 in extra mortgage repayments per year by not switching lenders, new research has found.
This is an increase of €657 over the past 12 months with a monthly saving of up to €135 for every €100,000 owed on a 25-year mortgage for those who do switch.
Homeowners who switch to raise funds to improve the energy rating of their house can now end up with similar or lower monthly repayments thanks to the entry of new Green rates onto the market, the doddl.ie mortgage switching index also found.
The volume of mortgage switching has increased by over 35% year on year as more householders take advantage of the recent downward shift in mortgage interest rates.
More switchers are now turning towards independent market-based advice as four mortgage lenders, including those offering the lowest market rate and long-term fixed rates, only offer their products through brokers.
Martina Hennessy, managing director of doddl.ie, said: “This represents a positive shift in consumer behaviour as mortgage applicants seek out market-based advice and lower rates.
“All banks claim to be customer centric, however, it is the new entrants and non-bank lenders that are leading the way with regards to lowest market rates and new innovative products such as whole of term mortgage rates.
“The onus is now on mortgage applicants to embrace these lenders, not just look at the status quo, and consequently put pressure on the pillar banks to move in the same direction.”
A new housing development in Dublin (Niall Carson/PA)
Figures for those topping up their existing mortgage has also increased dramatically with a 43% increase in top-up mortgage drawdowns year-on-year.
“We are seeing a significant increase in mortgage holders looking to release equity in their home to carry out home improvements and fund extensions,” Ms Hennessy added.
“After spending the past year largely at home, people are finding that in many cases, their environment is not suitable for their needs.
“With quality housing in short supply, mortgage holders are increasingly opting to renovate with projects ranging from minor upgrades to larger extensions and attic conversions for more living and working space.”
Research earlier this year showed that more than half of households are considering home improvements, motivated by increasing the comfort and warmth of their homes.
“Those who are improving the energy rating of their home to B3 or above are increasingly securing one of the Green rates currently on offer from lenders including Haven Mortgages, AIB, Ulster Bank and Bank of Ireland,” said Ms Hennessy.
“Haven Mortgages are the latest lender to introduce a Green rate product with a four-year fixed rate of 2.15% for all loan to values up to 90% finance.
“This rate is available for purchasers and switchers with switchers also eligible for a 2,000 euro cash amount on switching.
“If your BER is set to become more favourable due to home improvement works then lower Green rates can mean that even when you release equity for works, your monthly repayment does not increase.
“A mortgage holder on a low variable rate of 3.15% looking to release equity of €25,000 for home improvements with current mortgage €250,000 would currently repay €1,205 per month over a 25-year term.
“If this client released equity of €25,000 to bring the total mortgage to €275,000 and became eligible for Green rate discount, their rate would be 2.15% and their repayment would be €1,186 per month.”