Consumer Corner: How to manage your mortgage now to save money

There was a surge of mortgage switching in 2022 which saw the highest volume of mortgage switching on record.

For most people their biggest monthly outgoing is their mortgage payment. That is why it deserves our attention. Following a decade of low rates we have now entered a new cycle of rate increases with many mortgage holders experiencing rate increases for the first time.

Martina Hennessy, managing director of consumer website Doddl.ie said that 2023 should be the year that we take control and make smart decisions when it comes to our mortgage. Many homeowners, she said, are needlessly paying an average €3,857 in extra mortgage repayments per year by not switching lenders.

“There is still a lot of value in the Irish mortgage market, but you do have to work harder to find it,” she said. She added that seeking out a lower interest rate should be a priority this year for homeowners.

The latest Central Bank review of switching activity in the Irish mortgage market found that 61% of eligible switchers could save over €10,000. The research also shows that many mortgage holders do not know what rate they are paying or if they could get better by switching to another lender.

“It is so important in the current environment of rising interest rates that you take control of and understand if you are exposed to interest rate increases. Interest adds no value to you or your mortgage, so your aim should be to reduce it to reduce your mortgage repayments and overall cost of credit,” said Ms Hennessy.

There are €12 billion in mortgages rolling off fixed rates in the next three years and these mortgage holders will find themselves making higher mortgage repayments which will negatively impact their family finances, added Ms Hennessy.

Experts say for anyone on a fixed rate it is worth exploring if they can exit it early and fix for a longer time now before interest rates increase even further.

There was a surge of mortgage switching in 2022 which saw the highest volume of mortgage switching on record. This was brought about by two main lenders exiting the Irish market but also more awareness of interest rate increases and the ability to switch mortgage lender.

However, Ms Hennessy said the numbers switching are low relative to the number of mortgage holders who could save by switching.

“Many mortgage holders when faced with multiple mortgage options are afraid to make the wrong decision and instead make none at all which results in them paying more than they need to on their mortgage,” she added.

Even though rates have increased there are still some very strong rates available but you just have to do more research to find them. It is worth putting time aside to focus on your mortgage and how you can save. As with most things financial, it is worth doing your homework and sussing out the market to see what deals are available and how you can save money in the long term.

Trevor Grant, Chairperson of the Association of Irish Mortgage Advisors (AIMA) said that mortgage interest rates could remain volatile for the foreseeable future and that switching your mortgage is an important consideration for people looking for ways to contain their monthly outgoings.

For every €100,000 borrowed, mortgage holders are likely to see repayments increase by €25 per month for every 0.5% rate increase. In its Financial Stability Review published late last year, the Central Bank warned that households and businesses are facing ‘substantial real income and repayment shocks’. It also warned that the world economy is slowing and that there could be persistent stagflation and that the Irish economy is facing increased downside risks. This does not bode well for the year ahead, according to Joey Sheahan, Head of Credit at Online Brokers, MyMortgages.ie.

“Many Irish people could find themselves in dire financial straits this year as a result. Hints from the ECB that it may slow the pace of interest rate hikes will be some relief to the hundreds of thousands of homeowners who have seen their mortgage bills shoot up since July. However, even if the pace of ECB rate increases slows, the rate hikes of 2022 will not be reversed any time soon and homeowners will continue to find themselves under increasing pressure to meet their mortgage bills as well as the barrage of other expenses which are going through the roof too,” he said.

Mr Sheahan said that anyone who hasn’t refixed or switched their mortgage this year, should immediately look at their options today regardless of whether they are in a fixed or variable rate contract.

“Many borrowers don’t know that in many cases, you can break a fixed rate with no fee and switch to a lower interest mortgage rate with the same or another bank.

We cannot stress enough the urgency of switching. The economic uncertainty that is facing us means that we should be doing what we can now to stabilise our finances where possible and as a mortgage is most people’s largest outgoing, reviewing your interest rate is the most obvious place to start.”