How much money can people save by switching their mortgages

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Many Irish families are losing large amounts of money every single month since they didn’t look into switching their mortgage. Lots of people don’t realize that mortgages rates are falling and that lenders are willing to attract customers at this time.

But do the benefits of switching your mortgage outweigh the drawbacks?

Is switching your mortgage worth all the work?

The short answer is yes, it definitely is. Early this year, the Economic and Social Research Institute, an Irish think-tank that informs governmental policies, reported that Irish families could save large sums of money by moving their mortgage to their lender’s competitors.

But don’t Irish families already pay more than they should for a mortgage in Ireland? Isn’t that the way things work around here?

Compared to other countries in Europe, you would be right. The only country that has higher mortgage rates in the eurozone then Ireland is Greece. In Europe, the average home loan rate is 1.37%. That average home rate is approximately half the average home loan rate in Ireland (2.9%). For fixed rates in Ireland, the average rate is 2.8%, and for variable rates it is 3.2%. [1]

Let’s say you take out a mortgage for 200,000 euros over 30 years. At the average Irish home loan rate of 2.9%, you would be paying roughly 832 euros a month for 30 years. Compared to the average European home loan rate of 1.37%, you would be paying an only 677 euros a month. That means the Irish mortgage owner would be paying an extra 155 euros a month in this scenario. [2]

So, are people stuck with overpaying for mortgages?

Unfortunately, you will not be getting as good a mortgage deal as your European neighbors. Fortunately, as more competition comes into the Irish mortgage market, rates have been declining slowly during the past few years. [3]

Banks such as Halifax did leave Ireland during the recession. In recent years, key lenders such as AIB, Ulster Bank, and Bank of Ireland are being forced to offer better mortgage deals. Not to mention the non-bank lenders that are entering the market, and some of the credit unions are getting in on the action too.

How much can you save by switching a mortgage?

Let’s look at another example. You are a couple that took out a 30-year mortgage amounting to 300,000 euros only two years ago. This 300,000-euro mortgage was at 3.5%. According to AIMA’s mortgage advisors, this couple can save about 140 euros a month by switching to a 5-year fixed rate loan plan at 2.5%. If this couple switched to a 2.95% standard variable mortgage rate, then this would give them an extra 85 euros every month. [4]

This article was written by Ian, an intern at Irish Mortgage Brokers and from the USA.