We know that the very idea of switching mortgage providers can seem stressful; however, it can save you a lot of money. So, looking into this option might be worth your while.
According to the data from the Competition and Consumer Protection Commission, in the last five years, only 2% of people have decided to switch mortgage providers. When you have in mind the fact that the competition between mortgage providers is finally becoming serious, resulting in lower mortgages rates, this piece of information doesn’t seem to make much sense.
So why aren’t people switching providers?
Because it’s too much work for results that people can’t see tomorrow or the next month. That fact stands.
When you switch to a cheaper motor insurance provider, you can see how much you’re saving immediately. When you get a better deposit rate, you can literally see more money staying in your wallet. However, when it comes to switching mortgage providers, the results can’t be instantaneous. The savings made this way come in over the years, which is exactly why this should be done.
For instance, let’s assume you have a mortgage of €250.000 over 25 years. Depending on your current mortgage rates, if you switch to one of the lowest rates available at the moment, you can save up to €48.000 over the term of the loan, which, you have to admit, is an incredible number.
Although switching might take some time, that number might be worth the investment. Especially since most people are willing to bargain with their mobile phone providers over €10 per month.
On the other hand, people do have a good reason to be sceptical. Recent scandals regarding repossessions and trackers have made the general public unwilling to trust banks. So now, thanks to that bad PR, banks are now offering loans at low rates, with cashbacks and free insurance schemes. Although those gimmicks are not reason enough to switch, saving money is. The best part is that it really isn’t half as difficult as it might seem.
So how can you do it, and who can help you?
The Central Bank is considering new measures. Although the primary job of this institution is keeping banks profitable, and the banks under its wing are ripping their customers off as much as they can, it is also in charge of governance over other banks. That means that the Central Bank has to ensure that banks aren’t deceiving customers or overstepping the mark.
According to their official statement, the Central Bank’s role isn’t to promote switching mortgage providers, but to “make sure lenders aren’t putting impediments in place”. They are still determining what exactly “impediments” are in this case, but this institution definitely has to tackle their own lax approach to this matter.
And while the Central Bank isn’t promoting switching mortgage providers, there are other resources that can help you switch. There’s the CCPC’s website (www.consumerhelp.ie) that offers information on switching. Also, there are comparison sites like Bonkers (www.bonkers.ie) that regularly update their data on variable and fixed rates from all lenders.
Who can switch without much of a hassle?
Although banks really want new business, not everyone falls under the “right kind” of a customer. Basically, if you have a good job, you’re solvent, and you’re paying your mortgage with more than 20% equity in your house — you can switch whenever you want.
However, people who are late with their payments, people who are in negative equity or in positive equity up to 10%, or those who have had their mortgage restructured, aren’t likely to find a way to switch.
Also, for obvious reasons, those who have tracker mortgages shouldn’t even consider switching and should stick to their existing contracts.
Before you try and switch, calculate your LTV
Loan-to-Value ratio is the key to mortgage shopping. Banks will offer cheaper interest rates for those customers who are a lower risk. Simply calculate the outstanding mortgage by the value of your house.
Outstanding mortgage is something you can get simply by calling your bank, while the value of your house is more of a guess. You should check the values of similar properties in your area and base your estimate on that.
However, if you go ahead, a formal valuer will have to check your estimate, so we advise to be conservative.
As long as your LTV is lower than 50%, you have a great chance of getting a better rate.
Should you do it yourself or use a specialised mortgage broker?
You can try and do this yourself, but it is highly advisable to use the services of a financial advisory firm like All Financials to make the process a lot simpler and stress free.
We can coordinate the documentation needed and take care of everything related to the switch. The best part is that we also don’t charge any consultation fees.
Fixed or variable?
If you lock in for several years, banks will offer lower fixed rates, since they don’t want you to leave. So, on the one hand, you have exact repayments, and on the other, the risk of rates dropping even further. Weigh your options carefully before you decide.
Five simple steps to mortgage switching:
Calculate your LTV ratio
Check CCPC’s website and Bonkers to see the latest rates
Go to www.icb.ie and apply for your credit rating report
Go to the new bank with all the required paperwork and fill the application forms
If need, effect new mortgage protection policy
In the end, you can potentially save about €1.920 per year, and you will need about three months to complete the switch.
Like we mentioned earlier, All Financials doesn’t charge any consultation fees so, if you are thinking of switching your Mortgage, please don’t hesitate to contact us and we will be happy to help!