Sinead Ryan: How to switch your mortgage and save money – without the fuss

Mortgage rates vary across Europe but the average is 1.78pc
Mortgage rates vary across Europe but the average is 1.78pc

The banks regularly and rightly get hammered over ripping off customers, but sometimes it’s the customers who can make better choices to save themselves money.

The best way to save a load of dosh is by switching your mortgage, but fewer than 1pc of people do this. They perceive it as being a lot of hassle, expensive and time-consuming. They’re right, of course, it is all of those things.

But what if there was a way to switch your mortgage without the fuss? There is, and it’s one many people don’t consider, and yet if you live in Dublin, chances are you can switch it, for nothing, by keeping it with your own bank.

Bank of Ireland, KBC and Permanent TSB all appeared before the Oireachtas Finance Committee recently for their regular rap on the knuckles, TDs riling them over charging high interest on mortgages. All of them said they had thousands of customers who could avail of lower rates but weren’t.

Now you could argue they haven’t tried hard enough, and rates are still double what other Europeans pay, but in any one bank there are dozens of interest rates that apply to mortgages.

This is because each mortgage can be treated individually and banks have written to thousands of customers to tell them they may qualify for a lower interest rate.

Many are suspicious of the offer and don’t follow through.

This week I’m looking at how you can get a lower rate, and what you should do next.

The loan-to-value figure is key. It is the ratio between the value of your house and the mortgage on it.

A property worth €450,000 with a loan of €300,000 has an LTV of 66.6pc, for instance.

Dublin house prices have risen substantially since 2011, so your original LTV may now be much more attractive.

Banks base interest rates on risk: a property with a 50pc LTV is a better bet than one with 90pc.

In many cases the bank is even prepared to pay for a valuer to do the maths (if not, it costs around €150).

Fixed v Variable

If you are currently on a fixed rate loan, it would be unwise to change it before the fixed term is up. But then, all bets are off! If your house is worth more after the term, get it revalued and ask your bank to offer you a full range of both fixed and variable rates on offer using the new LTV.

You should definitely tell them you’re prepared to switch to a new lender unless it comes up with an attractive rate, and do your homework on other offers to prove it.

Bear in mind interest rates are set to rise as early as next year, the ECB has warned, so it may even suit you to re-enter a short fixed-rate period as long as your bank is prepared to give you an attractive rate to shore up your business for that long.

The Savings

Switching from a 4.5pc rate to 3.1pc on a Bank of Ireland mortgage of €300,000 would free up €250 per month. You can either keep repaying the higher figure, or save it elsewhere.

Permanent TSB has a “managed variable rate” offer currently, whereby if you qualify for a lower LTV, it will give you a lower interest rate and it will pay for the valuer.

If you originally took out a standard variable rate (SVR) of 4.5pc but now have an LTV of less than 50pc, thanks to rising property prices, you may be eligible to switch to a rate of 3.7pc, resulting in monthly savings of €42.36 per €100,000 borrowed, by doing nothing.

The Paperwork

Unlike switching to another lender, there is no conveyancing required inter-bank. You don’t need lawyers or surveyors. It’s simply a contractual amendment to the existing contract for which they may charge a small administration fee.

Life Insurance

Any change to your mortgage should prompt a look at your mortgage protection policy. Rates here have dropped considerably with new plans far cheaper than one you might have effected 10 years ago. Use a broker to compare.

What’s next?

If you believe you may qualify, Joey Sheahan, head of credit at says: “Contact your bank directly and simply ask what interest rates are available if you keep your mortgage with this particular lender.

 “Your next step should be to compare these rates with others on the market. If you decide to fix with your existing lender but keep the old repayments, ensure they have facility to overpay without penalty.”

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