BY JOHN ELLIS, FINANCIAL ADVISOR
Do you want to save on your monthly mortgage repayments? Want to lock in a rate before the proposed European Central Bank (ECB) announcement of the first of a series of predicted interest rate increases?
Many mortgage holders who have a good credit history can make some serious savings over the term of their mortgage.
In recent weeks Avant Money and ICS Mortgages have announced interest rate hikes with a sweep of increases across the board once the ECB make their announcement in July
Joey Sheahan of MyMortgages.ie says: “It is expected that the first ECB rate increase will be approximately 0.25%, and that this will be followed later in the year by two, if not three, further increases with hundreds of thousands of homeowners being affected.”
As the July ECB meeting draws closer, more people will want to move or switch, adding to the existing application processing delays that some lenders are already experiencing with the fear that lenders may no longer offer the current low rates.
For many people the whole mortgage process is a nightmare. But the the switching process had been made easier by the Central Bank. Since 2019 it has put new measures in place to make it easier to switch your mortgage.
According to the Competition and Consumer Protection Commission (CCPC), lenders must tell you about cheaper options 60 days before your fixed rate mortgage period ends.
If you have your home revalued with a corresponding change in the loan to value ratio then the lender must notify you if you are on a variable rate (but not a tracker) that you can move to a cheaper rate due to the change. But you will need to push this with your lender.
When you submit a completed mortgage application, the lender must be given a decision within 10 business days. Not as easy as it seems sometimes; go through the checklist with a fine toothcomb and provide all the information requested making sure all financial documents are ‘in date’.
They must give you a comparison of how much your mortgage costs versus other options offered by your lender. Again, you need to ask, and they must explain the pros and cons of any mortgage incentives such as cash-back offers in a clear way.
What about cash-back offers? Can be too good to be true? They can! It might seem like a great deal, especially if you are moving house and have additional expenses. But what about the long-term cost? You need to do your homework with the interest rate always front and centre.
The CCPC website gives a striking example. A borrower is offered €6,000 cash back from Lender A – the interest rate offered is 4.6% on a mortgage amount of €300,000 over 25 years – total cost over the of term – mortgage minus the cash-back – is €194,249.
Lender B offers, the same amount and term, but no cash-back – with an interest rate of 3.6%, the total cost of credit is €150,561.
In this example taking the €6,000 offered will cost €43,688 over the term of the mortgage and the mortgage repayment with Lender A is €165 more expensive a month than Lender B.
There is a range of mortgage adverts doing the rounds now. Lenders vying for your business and trying to lure you away from your current lender. But before you commit, especially if contemplating moving lenders, you need to be aware that the mortgage repayment is not the only cost you will have to bear. You need to calculate the additional costs attaching to the move – for example:
* Arrangement Fees – some lenders and brokers change an arrangement fee and can be up to 0.5% of the loan amount. Solicitors’ fees can be anywhere from 1%-2%.
* A new valuation is required as part of a new mortgage application. A structural survey may be required with the fee dependent on the type, age, and location of the property.
* So should you go direct or use a mortgage intermediary? Research show about 65% of buyers go directly to the lender while 35% use mortgage intermediaries.
If yours is a straight switch and with some banks only requiring a payslip, photo ID, and six months bank statements for your main account to process a straight switcher mortgage, then that’s the way to go.
But if your mortgage is more complex, then the Intermediary route could be the way as many intermediaries have sophisticated software packages that will crunch all the possible permutations across all lenders for all imaginable scenarios.
Tel: 086 8362633