Thousands of home mortgage holders to pay €3,000 too much this year

TENS of thousands of home owners will pay up to €3,000 too much this year for their mortgage, it was claimed yesterday.

Figures released by independent financial group IFG Group show that, over the course of a 30-year loan, some people will make €50,000 in unnecessary interest repayments.

IFG’s Gary Owens said many people are unaware they can switch mortgage provider without penalty — and with the lenders picking up the cost of the legal fees. With house prices having fallen in 2007, the majority of mortgage holders are paying extra cash for assets that are declining in value.

Mr Owens said homeowners with outstanding mortgages of €400,000 will unwittingly overpay banks and other lenders by more than €2,700 in 2008.

“Many Irish home owners simply do not know what their current mortgage rate is,” said Mr Owens. “A mortgage is any household’s biggest expense, yet Irish people seem to believe that they have no control over their repayments when, in fact, they could and should be saving huge amounts of money.”

IFG research shows that more Irish people shop around on an annual basis for car insurance than for better mortgage rates.

“It is quite bizarre that people will spend the time most years to make several phone calls to try and save a couple of hundred euro on their car insurance when making one phone call could save them 10, 15 or even 20 times that amount,” said Mr Owens.

He said mortgages were paid out of after-tax incomes. Therefore, a person paying €3,000 extra to a lender was effectively handing €5,000 of their pay packet to service a debt they should not have.

IFG figures show a person with an outstanding mortgage of €300,000 on a property worth €500,000 is repaying €1,647 a month.

By switching their mortgage they could reduce that outlay to €1,461 (€186 a month) and save themselves €2,232 this year, and almost €40,000 over the duration of the mortgage.

People with a €350,000 mortgage on a similar property would save €2,556 in 2008.

Switching a €400,000 mortgage on a property worth €500,000 would save home owners €2,772 this year and more than €43,000 over the duration of the mortgage.