Mortgage switching more than doubles as homeowners try to avoid ECB rate hikes

Mortgage switching has increased by 115.8% since this time last year, according to new data

Banking and Payments Federation Ireland chief executive Brian Hayes said the new record high set for the average homebuyer mortgage is also worth noting. Picture: Sam Boal/Rollingnews.ie

The number of homeowners switching mortgages has more than doubled, as customers seek better value in the wake of three interest rate hikes from the European Central Bank (ECB).

New data shows more than 5,000 people switched their mortgages in the three months to the end of September, a 115.8% increase on the 2,355 mortgages that were switched in the same period last year.

The figures are contained in a report from the Banking Payments Federation of Ireland (BPFI), which also shows the average mortgage drawn down by Irish homebuyers has hit a new record of €284,623 in the third quarter, surpassing levels seen during the peak in early 2008 prior to the collapse of the country's housing market.

The ECB last week announced its third interest rate hike of the year, adding 0.75% to its base rates. The increases have added hundreds of euros to the monthly repayments for homeowners on tracker mortgages.

AIB and a number of non-bank lenders have also announced increases to interest rates on their fixed-rate mortgage products for new customers. 

Other lenders, most notably Bank of Ireland and Permanent TSB, have yet to alter their rates, but there is widespread expectation that variable and fixed rates will increase in response to the moves by the European Central Bank.

"Year on year we can see the number, as well as the value, of non-purchase mortgage drawdowns more than doubled in the third quarter," BPFI chief executive Brian Hayes said. 

Customers are seeking out better rates in the wake of the interest rate increases recently announced by the ECB.

A total of 14,851 new mortgages to the value of €4.1bn were drawn down by borrowers in the third quarter. 

It represents an increase of 29.4% in volume and 45.7% in value compared to the same period last year. 

“One of the most notable points from this quarter’s drawdowns figures is the new record high which has been set for the average homebuyer mortgage which has now hit €284,623 and is over €28,000 more than it was in quarter three, 2021 (€256,547). 

"This comes on the back of strong house price inflation and the continuing challenge of supply in the housing market," Hayes said.

Further hikes to come 

Despite the recent rate hikes, there is further pain in store for borrowers and mortgage holders. 

The ECB is to meet again on December 15 to discuss monetary policy. 

Speculation has already begun that another 0.75% increase could be announced.

The bank is taking these measures in an attempt to rein in runaway inflation that is currently at more than 10% across the EU.