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Thousands of homeowners are needlessly overpaying their banks due to their failure in switching mortgage lenders.

The cost to the average mortgage holder has now reached €3,400 a year – a rise of nearly €900 since a year ago.

The Irish Independent Mortgage Switcher Index calculated the potential financial savings in accordance with the massive spread that exists between the lowest and the highest interest rates on the market. It found that the difference between the currently available rates has grown to 2.2pc.

Variable rates as high as 4.5pc are being charged to homeowners, but rates as low as 2.3pc are available for the ones that want to change. Discounted mortgage rates have been ignored by the experts who compiled the index.

According to the index produced by switching platform, over a month, this can realistically represent a saving of around €281 for the average home mortgage.

There is a golden opportunity to switch as homeowners have risen out of negative equity, so prevalent during the recession, while Central Bank rules have made switching easier.

Some banks are even offering cash lump sums to switchers.

Switching rates has increased recently, but many homeowners are still reluctant to move their mortgage to another lender. Some are unaware they can switch, with others are fearful that something might go wrong.

But experts said the reluctance to switch was costing homeowners dearly.

Martina Hennessy, the managing director of, said a typical homeowner on a 25-year mortgage is paying €1,335 a month. This same homeowner could cut their monthly repayments to €1,054 just by switching mortgage provider. This would give an annual saving of €3,372 – which is about the same as the average monthly salary for an Irish worker.

For a family with a larger mortgage of €300,000, annual savings of €4,200 can be made.

The rate of mortgage switching has more than trebled in the past four years. Just 5pc of mortgage loans at the end of 2015 were switched, jumping to 14pc at the end of last year, she said. Adding that thousands of more homeowners could benefit from making the move.

“Consumers are becoming more aware that switching can save them money, mainly thanks to Central Bank requirements on lenders to make mortgage switching easier,” said Ms. Hennessy.

She added that property values have increased. This means loan-to-value ratios have gone down, also making it easier to switch. Many lenders have tiered rates, with lower interest charged for those with lower loan to values.

Many banks also provide what they call a “switcher pack”

Which is a lump sum amount to help defray the cost of the switching, such as conveyancing fees.

“These switcher packages range from value €1,650 to up to 3pc of the mortgage amount outstanding back in cash.”

“The easier it becomes to switch, the more people will realise that they are not tied to one financial institution if there are better rates on the market,” Ms. Hennessy said.

The launch of the new switching index comes at a time when banks are continuing to cut their mortgage rates:

  •   – Permanent TSB became the latest to give borrowers a break by reducing its fixed rates for new customers and those switching to it.
  •   – Ulster Bank this month also reduced some of its mortgage rates
  •   – ICS Mortgages launched into the residential market, with some of the lowest rates
  •   – KBC last month cut its rates.

It comes as the European Central Bank pressured banks in the eurozone to lend more to homebuyers after it reduced the interest rate, it pays banks that deposit money with it.

This is a way to force banks to lend more, instead of depositing money with the ECB.

Author: Fran Cooke

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