BY JOHN ELLIS, FINANCIAL ADVISOR
It’s hard to fathom how speedily many people’s mortgage repayments have increased since July 2022. Nine increases have been saddled upon many home owners, adding significantly to the financial stress which they were already under. The latest hike will see tracker mortgage holders paying interest rates of between 5% and 5.75% as a result of a recent 0.25% increase.
There was a time that having a tracker was the best place to be with some having a repayment as low 1.1%. In this financial whirlpool there is advice afoot that, those on trackers, if they have not already done so, should make it their priority to look at switching into a fixed rate product, as staying on the tracker rate in the current interest rate cycle could ultimately prove far more expensive.
However, as many are discovering to their cost a fixed rate must come to an end and many are now increasingly being drawn into the firing line. More than 60,000 homeowners will come off low-cost fixed rates this year, while another 70,000 will do so next year. Their repayments will increase significantly unless they act now, assuming they have met their re-payment schedule in full and on time, as they need to shield themselves from the mortgage shock just around the corner.
You need a steer through the rates on offer and guidance to lock into a new fixed rate early even if the current fixed rate hasn’t come to an end, because when your fixed rate comes to an end your lender will only advise you on the products they have to offer and not what is available in the market. Only a market-based mortgage broker can provide this essential and highly valuable information.
Up to this point though, many who can change have held off hoping that better rates are coming down the line.
Trevor Grant, Chairperson of the Association of Irish Mortgage Advisors (AIMA) says, that with fixed rates higher than they were a year ago waiting seems to be increasingly futile and medium to long-term fixed rate deals are unlikely to reduce in the next year or so and are more likely to increase again this year. Even if the ECB starts to reduce it rates at some point next year, which is far from certain, home-loan mortgage rates are highly unlikely to fall unless there is global shock like another pandemic or a massive global recession.
Joey Sheahan, author of The Mortgage Coach says: “To date, the Irish property market has shown resilience to the spate of ECB rate increases – there are still thousands of people looking for homes, and with the CSO’s most recent stats showing a slowdown in price growth, I believe more people will come to the market in the coming months. I don’t believe today’s rate increase will deter anyone who is ready to purchase a home as it’s generally cheaper to repay a mortgage as opposed to renting the same property.”
Isn’t it strange that you can now arrange a 30-year fixed rate of 4.1% with no risk, assuming you make your repayments of course. Brokers are being inundated with enquiries from people who are looking for certainty. At that 4.1% rate, borrowing €350,000 fixed for 30 years costs €949.07 monthly vs the current rent on a similar property. It’s a no-brainer if you have the ‘credit score’ to avail of the rate.
As always this advice is only good for those with pristine credit scores and who can walk into any bank with the best rates and avail of the fixed offer. But what about the tens of thousands whose mortgages were sold to vulture funds and are locked into accounts that they must continue to service if they want to keep a roof over their heads. The only advice seems to be, suck it up!
For those who can the advice out there is look at your switching options. Yes, switching activity is slowing down as people are under the impression that interest rates are too high now but are likely to fall soon. Don’t try and call the market.
For those struggling with the current rate increases speak with your lender immediately. Communication is so important – without it you can fall into arrears and the problem gets out of control in a matter of months.
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