To switch or not to switch? That is the question (that we are helping you to answer)

For something as significant as your mortgage, you want to make sure that, at every step of the way, you are making informed decisions that protect your own best interests.

When the rate of your mortgage is coming to an end, it is important to explore all your options to make sure that whatever choice you make when it’s time to renew, it’s the right one for you.

In 2024, it is estimated that up to 80,000 current mortgage holders will see their fixed rates coming to an end at some point this year. These borrowers should be prepared to expect higher repayments. It’s important that mortgage holders become more aware of the options available to them.

Commenting on Ireland’s mortgage switching activity for 2023, Brian Hayes, Chief Executive of the Banking Payments Federation of Ireland (‘BPFI’) noted a ‘sharp drop’ in mortgage switching activity. The BPFI Mortgage Drawdowns Report Q4 2023¹ noted switching activity fell by 68.6% year on year in volume terms and by 71.8% in value in the same period. Over an 18-month period, the ECB’s main lending rate was increased 10 times – a direct result of which was mortgage borrowing costs being driven up.

The two main options when renewing, are:

• Stay with your current lender or
• Explore other options in the market.

Both options come with their own advantages and drawbacks, so we have put together the below list so you can start to think about which choice may be right for you.

Staying with the same lender

Advantages

The main advantages of staying with the same lender are down to the time it may save you. Renewing with the same lender - whether you are carrying on with the same mortgage product or going for something else they offer – can be almost instant if needed. There is also no need for an application process or credit assessment, which can save you further time and effort.

Disadvantages

While continuing with your current lender can save you time and hassle, it does not necessarily save you money – it could be doing the opposite. The lender you have now may have offered you the best deal a few years ago, but your circumstances may have changed a lot since then and the market could now be full of other lenders and products that are more suited to you, that you may previously not have been eligible for. As a mortgage broker, I have worked with so many people who assume they are still getting the best deal for them until I help them explore their full range of options.

Going with a different lender (remortgaging)

Advantages

The main benefit for remortgaging is that it can save you money long-term. Not only could the offerings of other lenders be more suited to your current financial situation, but many lenders offer exclusive deals to new customers, allowing you to save even more. Also, let’s say there is slightly more household income since taking your mortgage a few years ago, maybe you or a partner have had a promotion or moved to a better-paying job. The full financial review that comes with remortgaging could give you the opportunity to reduce your mortgage term which could ultimately save you interest, or possibly mean you could borrow more than you could before, allowing you to put more towards things like home improvements or consolidating debt.

Exploring your mortgage switching options can be fundamental in saving thousands of euros over the life of the mortgage. However, there are several other additional reasons why borrowers are keen to switch their mortgage:

• Cashback offers from mortgage lenders.
• Overpay your mortgage – some lenders can offer the facility to overpay 10% of the mortgage balance per annum without penalty.
• Pay off your mortgage faster.
• Online Mortgage Application – allowing for a more streamlined process, giving the user a hassle-free experience.

An example of the savings to be gained by switching your mortgage:

A borrower that has a mortgage balance of €300,000 with a house value of €400,000. The current rate is 4.50%, and they have 25 years left on their mortgage. Switching to the cheapest rate on the market, a saving of €141.38 per month is saved - €1,696.56 per annum.²

Disadvantages

There can be costs involved when seeking to remortgage. Mortgage Switchers are advised to be aware of these upfront costs. Typically, there are two costs involved – a valuation report fee and conveyancing fees. Several lenders offer cashback for switching which can be used to cover legal fees. Typically, you’ll get the cash paid into the account you use to pay your mortgage within 2 months.

The value of a broker

Any mortgage decision you make has pros and cons, and the consequences of not getting it right the first time could be massive. Many people make the mistake of thinking they can handle their mortgage journey alone when access to support is vital to help them make the best decision for them.

A mortgage broker will sit down with you to fully understand your needs and capabilities. They have relationships with most of the mortgage market and will be on hand to provide specialist, impartial advice that is based on you and your unique circumstances.

Using the help of a mortgage broker is key to ensuring that you are going into these huge decisions fully informed and confident that the outcome will be the best for you.