Doddl Managing Director Martina Hennessy - Conor McCabe Photography - Irish Independent

Homeowners could save €20,000 over 7 years

February 09, 2022

90,000 could be in line for lower mortgage rate following surge in house prices

Surging house prices over the last two years mean that thousands of homeowners are unexpectedly eligible for lower mortgage rates.

It applies to some 90,000 homeowners who drew down their mortgages between 2018 and 2020, according to the findings of the latest Irish Independent mortgage switching index.

Mortgage customers will now be able to switch to lower mortgage rates for their new properties. managing director Martina Hennessy said: “With house prices increasing by over 10pc annually, opportunity is now knocking for those who have bought as recently as 2020 to take advantage of lower loan-to-value mortgage rates which could save them more than €20,000 over seven years.”

She said mortgage interest rates start to get a lot more competitive at 80pc loan-to-value as banks tier their rates based on this calculation. Her comments come days after the European Central Bank’s (ECB) President Christine Lagarde said a rise in European wholesale borrowing rates could not be ruled out this year.

A rise in ECB rates would mean that those on variable rates and homeowners coming off a fixed rate will face higher mortgage rates. But Ms Hennessy said recent homeowners are at an advantage.

“With double-digit property inflation in the past few years, coupled with some of the loan having been paid off, anyone who took out a mortgage in 2019 or 2020 with an original loan-to-value of 90pc should be at 80pc loan to value now,” she said. “A loan to value of 80pc means a homeowner has built up equity of 20pc in their home.

“Now is the ideal time for these homebuyers to avail of some really good long-term rates to reduce their monthly repayments while guarding against expected rate rises in the future.”

Ms Hennessy said the switching index shows homeowners are needlessly paying an average €4,308 in extra mortgage repayments per year by not switching lenders.

There are still over 200,000 households repaying their mortgage on standard variable rates of up to 4.5pc. But the lowest available rate is now a fixed rate of 1.95pc. The index is based on the average mortgage drawn down for new lending in both the first-time buyer and second-hand mover markets, currently €267,140.

The average new mortgage rate in Ireland at the end of last year was 2.79pc. However, in 2019 the average rate was just over 3pc.

Ms Hennessy said: “There are huge savings to be had by switching mortgages – especially for people who have recently entered the market on higher rates and feel that they can’t move for a few years.”

The average price of a three-bed semi-detached home in Dublin city was €425,833 two years ago. This has now increased to €471,667, she said.

With a 90pc mortgage and a 30-year term, the purchaser would now have a balance of €367,000. Their loan-to-value would be 77pc, meaning they are eligible for a rate of 2.15pc versus their current 3pc rate. This represents a saving of €161 per month, or €13,524 over a seven-year fixed term, Ms Hennessy said.

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