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Green Mortgage Switchers could save thousands in repayments

August 09, 2021

Homeowners who are improving the energy rating of their home to B3 or above can secure one of the green rates.

Homeowners who switch mortgages to raise funds to improve the energy rating of their house can now end up with lower monthly repayments.

This is thanks to the entry of new low-cost, green mortgage rates in the market.

Green mortgages are now being offered by a number of lenders and the rates are lower than conventional home-loan rates.Switchers can save thousands on their annual mortgage repayments and end up with a cheaper home to heat, the latest Irish Independent mortgage switching index has found.

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.

Managing director of Martina Hennessy said: “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.

“Haven Mortgages is the latest lender to introduce a green rate product, with a four-year fixed rate of 2.15pc for all loan to values up to 90pc finance.”

She said this rate is available for purchasers and switchers, with switchers also eligible for a €2,000 cash amount on switching.

If the BER (Building Energy Rating) is set to become more favourable due to home improvement works, then lower green rates can mean that even when equity is released to pay for the works, the monthly repayment does not increase.

Ms Hennessy gave an example of a mortgage holder on a low variable rate of 3.15pc looking to release equity of €25,000 for home improvements.

Assuming these homeowners have a mortgage €250,000, they are currently repaying €1,205 a month over a 25-year term.

“If these people released equity of €25,000 to bring the total mortgage to €275,000 and became eligible for green rate discount, their rate would be 2.15pc and their repayment would be €1,186 per month.”

The Irish Independent switching index found the volume of mortgage switching has increased by over 35pc in the last year.

This is due to more householders taking advantage of the recent downward shift in mortgage interest rates.

Homeowners can be needlessly paying an average €4,097 in extra mortgage repayments per year by not switching lenders, the index found.

This is an increase of €657 over the past 12 months. It means a monthly saving of up to €135 for every €100,000 owed on a 25-year mortgage for those who switch.

The index is based on the average mortgage drawn down for new lending in both the first-time buyer and second-hand mover markets in Q2 2021, currently €254,020.

The entry of lenders such as Avant Money to the market, which has now been joined by ICS Mortgages in offering rates as low at 1.95pc, has driven a rise in broker market share, Ms Hennessy said.

Meanwhile, there has been a 43pc increase in figures for those topping up their existing mortgage in the April to June period.

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