Thousands of mortgage holders on variable rates could be paying over 2.25pc more than necessary according to the latest Irish Independent doddl.ie Mortgage Switching Index.
Despite the return of sub-3pc variable rates to the market, many borrowers remain on legacy variable products of up to 5.25pc competition. While fixed rates have decreased significantly over the last 18 months, variable rates have remained stubbornly high.
14pc of all mortgages are on variable rates – almost 100,000 homeowners – according to the Central Bank’s most recent data.
“Banks have large volumes of existing mortgage customers sitting on these high variable rates and to reduce them would mean large back book repricing which would be costly,” said Martina Hennessy, CEO of doddl.ie.
“Lenders are banking on customer apathy. Unless more borrowers actively review their rates and switch, there’s no pressure to bring these uncompetitive rates down and we will struggle with pricing discipline in the Irish market.”
Mortgage switchers can now save more than double the annual savings available just five years ago, the Q2 index has found.
The average mortgage drawdown now stands at €346,842, up over €112,000 since Q2 2020 – a trend driven by rising property prices and increased borrowing levels.
As mortgage amounts grow, so too does the impact of securing a lower rate with switchers saving an average of €7,505 per year, up from €3,349 five years ago.
The Irish Independent doddl.ie Mortgage Switching Index is published quarterly and tracks the savings available to mortgage holders in Ireland through switching.
It is based on the average mortgage drawn down in the quarter and the differential between the highest and lowest mortgage interest rates available.
In June, the lowest rate on the market dropped below 3pc (2.98pc) for the first time since 2022.
“The increase in savings for switchers is the direct result of larger mortgages but also significant interest rate spreads,” said Ms Hennessy.
“This is leading to a resurgence in mortgage switching. However there still remains a large cohort of homeowners sitting on uncompetitive rates.
“With rates falling, larger loans being drawn down, and new flexible switching options available, apathy can cost borrowers thousands.”
The latest BPFI data shows switching up 67pc in volume and 91pc in value year-on-year.
The average value of switcher mortgages has increased to nearly €282,000, up from €235,000 five years ago.
Meanwhile top-up mortgages have increased by 25pc, with homeowners choosing to stay put due to a shortage of homes.
“We are increasingly seeing clients choose to remain in their current homes and carry out works due to a shortage of larger family homes in the market,” said Ms Hennessy.
Ms Hennessy highlighted the arrival of more flexible mortgage products, including Avant Money’s Flex mortgage (2.98pc), available across all BER ratings unlike and benchmarked to the 12-month Euribor rate.
And Nua Money’s new equity-release switching option provides innovative ways for homeowners to access funds without moving.
