Carrying out a real financial health check in 2022

There are at least 100,000 mortgage holders paying in excess of 4% a year when they could be paying half that

Whoever came up with the advice to “Look after the pennies and let the pounds look after themselves” has a lot to answer for.

People often get worked up about their bank charges. They ask me which bank will give them free banking. I tell them that I don’t know and that I don’t care. I have an active enough current account and it costs me about €100 a year in charges. This gives me access to ATMs around the country 24 hours a day, direct debits, automated credits and an efficient online and mobile payments system. I am quite happy to pay €2 a week for this service.

But people still seem to think I am wasting my money when I could get free banking.

However, when I ask them what interest rate they are paying on their mortgage, they look at me blankly.

Is it any wonder that there are at least 100,000 mortgage holders paying in excess of 4% a year when they could be paying half that?

For example, a Bank of Ireland customer, who has not reviewed their interest rate recently, could well be paying 4.5% on a €200,000 mortgage. They are donating €9,000 a year towards the profits of Bank of Ireland. All it takes is a phone call to their bank and they could reduce this rate to 2.9% which would save them €3,200 a year – enough in one year to pay their bank charges for 30 years.

They can get this rate irrespective of their Loan to Value or their credit rating. They can be in deep arrears and negative equity, and they can still get this 2.9% rate.

Many borrowers who are not in arrears and who have a lower loan to value, could go further and switch to one of the new entrants to the market such as Avant or Finance Ireland and reduce their mortgage rate from 4.5% to 2%. This would save them €5,000 a year on what they are currently paying. For most people, one year’s interest savings would be the equivalent of free banking for life.

So why are people paying €9,000 a year in interest, when they could be paying only €4,000?

Some Irish banks have not cut their variable rates in years. If you started on a variable rate, you are probably still paying the highest mortgage rate in the eurozone. Even if you started on a fixed rate when it ended you defaulted to the variable rate. And unless you proactively fixed it again, you are now paying €5,000 a year more than you need to be paying.

These banks attract new business with cashback and fixed rates which are lower than their variable rates. But unless the person switches banks after getting the cashback, they could well pay in excess of €40,000 more interest than they need to, over the course of their 30-year mortgage.

I have been very critical of Irish banks for having the highest mortgage rates in the eurozone. But is it any wonder that they gouge Irish customers when most of us couldn’t be bothered even checking our rate?

I have lobbied the government and the Central Bank on the extortionate mortgage rates in Ireland. But they both wash their hands of it. As long as people make no political noise, the government isn’t interested.

And for a lot of mortgage holders, things are about to get much worse. Two of the lenders with the lowest rates, KBC and Ulster Bank, are leaving the Irish market and their mortgages are being taken over by the two most expensive lenders - Bank of Ireland and Permanent tsb. The government and Central Bank will tell these mortgage holders that their contractual rights won’t be affected by the sale. But neither will the contractual rights of the acquiring banks be affected. When the existing customers of Ulster Bank and KBC roll off their fixed rates, they will default to the highest variable rates in Ireland and Ireland has the highest variable rates in the eurozone. Over the remainder of their mortgage, a customer with a €200,000 mortgage could well pay €30,000 more in interest as a result of the takeover.

So make a New Year’s resolution for 2022 to look after the euros and let the cents look after themselves.

Brendan Burgess is a consumer campaigner and is the founder of the consumer forum, askaboutmoney.com