Couples on high mortgage rates are working the equivalent of one day a month to fund the extra payment.
A new report from Doddl.ie has found that the difference between the highest and lowest interest rates on the market has now grown to 2.25% or around €291 per month.
Couples on the highest interest rate are working nine hours every month just to service this unnecessary debt
The gap between the lowest mortgage rate at 2.25% and the highest at 4.5% has widened to 27% from 21% at the same stage last year, and this means that some mortgage holders are needlessly paying twice as much interest on their mortgage.
It also found that mortgage holders could save almost €3,500 a year by switching lender.
The highest rate of repayment on the average 25 year mortgage as at Q3 2019 is €1,353.52, while mortgage holders on the lowest non-discounted rate are paying €1,062.03.
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 €243,512.
The doddl Index looks at the total number of switcher transactions per quarter as a percentage of all home loan transactions, excluding Buy to Let mortgages, to give an accurate picture of principal private dwelling house credit.
Managing Director of doddl.ie, Martina Hennessy, said: “The perfect example of how this disparity in rates affects people is a married couple, both earning the average wage of €38,871, with an after-tax income of €62,111.
“If these mortgage holders are on the highest variable rate they will be working over nine hours a month to repay the additional interest of €3,498 per annum.
“One member of the couple could take almost three weeks off unpaid a year and be in the same net financial position simply by switching to the lowest rate.
“The impact of lower interest rates is significant – mortgage holders on the highest rates can reduce their term by a full six years on a 25-year mortgage simply by switching to the 2.25% rate and making the same repayments.
“Mortgage terms of up to 70 years at expiry are offered to first-time buyers so revisiting initial terms is an opportunity to switch, reduce the interest paid and their mortgage term and make a huge impact on the overall cost of credit."
Mortgage switching transactions increased by almost 14% against the same period in 2018, but the latest figures show that mortgage switchers are still responding to single marketing messages from banks.
“Banks have been criticised for penalising their existing customers for their loyalty by offering lower rates to new customers,” said Ms Hennessy.
“Despite this, the latest Banking & Payments Federation Ireland figures show that 66.4% of mortgage switching was direct as opposed to via the broker market.
“This shows that mortgage holders are reacting to a single marketing message from a bank rather than seeking out impartial advice on the best value and options on the market via a professional broker."