For those of us not lucky enough to be on a tracker mortgage, there has been some good news in the last couple of month, with many of the main providers reducing either fixed or variable rates, writes Grainne McGuinness.
Bonkers.ie head of communications Mark Whelan, said recently: “There is finally some healthy competition entering the Irish mortgage market, which is good news.”
However, although variable rate customers will benefit immediately from any price increase from their own banks, many could still get better rates elsewhere. So what is the advice from experts? You guessed it, it is to switch. This is despite the fact that consumers are notoriously slow to switch providers, particularly for a complex product like a mortgage.
Joey Sheahan, head of credit with MyMortgages.ie promoted the positive benefits: “With the still curtailed new house building, banks are struggling to hit their mortgage
targets and so are turning to the switching market. This is creating an opportunity for many homeowners to make considerably savings.”
His company recently released figures which suggested that on ‘average’ mortgages throughout the country, anywhere between €40,000 and €100,000 could be saved by moving to another lender.
Mr Sheahan said people are struggling unnecessarily with repayments. “There are homeowners needlessly paying more than 3.6% in interest. A large portion of these people can easily switch lender once they have 10% equity in their property. There are less and less people in negative equity due to the unprecedented recovery in property values over the past few years.”
And yet, all the research and figures suggest that very few of us will switch. No matter how many experts advise us too, there is still a perception that the whole process is too difficult. So is it a lot of hassle? I asked Niall Daly, conveyancing partner with BDM Boylan Solicitors in Cork, for an honest assessment of switching and its popularity.
“We don’t see an awful lot of it,” he said. “There is some, but is not an avalanche. It would really want to make sense for someone, before they will consider it.” There are a number of potential issues he flags, although these will not affect all customers.
He says depending on the type you have, you may have to take out a new life policy, particularly if extending the term. If you have had any health issues since you took out your
original policy, you may run into problems if your insurer requires a fresh medical.
“It might not necessarily be a cost but it is one of those things you would want to be aware of,” he says.
One issue he is keen to highlight is the need to certify any work that has been done to the property.
“If the clients have extended or altered the house since they took out their first loan the solicitor should insist on getting an engineer to sign off on the work, and if it needed planning, check that they got planning,” he said.
Some solicitors will require that the local property tax is up-to-date on the property. There will also be a few hundred euro in charges relating to the deeds themselves. However, Mr Daly believes mortgage-holders should definitely review the loan, particularly if they originally took it out over a long term, 30 or 35 years.
“What I always say to clients is, if you can afford it, go back to your bank after a number of years and say you want to to reduce the term,” he said. “It will increase your monthly payments, so it does come down to affordability. But it will reduce what you pay in the long term. What people with very long terms are doing is taking short-term gain for long-term pain. You pay way more in the long run.”
While switching is a little more complex, he agrees it is something customers should consider as an option.
“Sit down with your calculator and make sure it is worth it. If the bank is paying the legal fees or giving cash back that will cover costs, that eases the pain. You can do it in less than a month if the customer is organised.”
Deal of the Week
In addition to groceries, Supervalu now sells insurance, offering cover for the home and car as well as travel insurance. It offers a range of discounts and sweeteners for customers, including vouchers and real reward points, and for December has an offer specifically aimed at couples.
Until the end of the year, customers can get up to 25% discount when they add their partner as the named driver on their policy. The customer gets €20 in money back vouchers to spend in-store. They will also collect 1,000 Real Rewards points but that is only a real incentive if you are already a regular Supervalu shopper and will use them.
The car insurance benefits include breakdown assistance, free windscreen cover and personal possessions in your car protected up to €300. The partner must be the only named driver, live at the same address, hold a full licence and have five years claim-free driving to qualify.
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