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Mortgage Switching: How you can save or access funds to pay for other expenses

2022-05-25

It has been reported that there has been a notable increase in mortgage switching in the first few months of 2022. Factors such as the exits of KBC and Ulster Bank from the market; growing choice and competition in the market; and expected interest rate hikes throughout Europe have contributed to the rise in mortgage switching. Despite these being the factors that have been highlighted, generally the main reason why homeowners switch their mortgage is to find better rates that put money back into their household budget. 

Why switch? 


The cost of living is on the rise and households are faced with increased spending on almost all their monthly bills. By switching your mortgage, you can limit how much you have to spend on a monthly basis and enjoy much needed savings or access funds to pay for other necessary expenses such as home improvements. 
  

How can I get long-term savings? 


As prices rise in every industry, it is expected that the European Central Bank will follow suit and increase interest rates. Unlike with other expenses, you can easily manage the cost of your mortgage by switching. To get ahead of the interest rate hikes, now might be the ideal time to switch your variable rate mortgage and fix on a lower rate. 
 
When considering the switch from variable to fixed rate, you have the choice between short-term and long-term fixed rates. Short-term fixed rates initially offer low fixed repayments and once the short term (e.g., 3 – 5 years) ends, variable rates will apply. With long-term fixed rates, you will receive low fixed repayments for the whole duration of the term (e.g., 15 – 25 years). 
 
The choice between short-term and long-term rates depends on your circumstances and level of predictability or flexibility you seek to achieve with your repayments throughout the duration of your mortgage. The benefits of fixed rates are: 
  • Fixed rates remain unchanged in an ever-changing market, so as interest rates rise, you enjoy the stability of fixed rate offers 
  • With a fixed rate mortgage, your monthly household budget will not have to change as interest rates rise, giving you more financial certainty. 
 
A downside of fixed rate mortgages is that if interest rates drop during the fixed period, you do not benefit from a lower rate and lower monthly repayments. However, a counter-argument to this is that it is better to have certainty that your mortgage repayments will not rise and you will therefore not end up paying more than the going rate at any point. 
 
Generally, you can switch to a fixed rate at any time without being liable for a penalty. You also have the option of switching with your current lender, although this is unlikely to return big savings as many lenders reserve lower fixed rates for new customers. Switching to a different, non-bank lender may provide the best savings for you, so it is important to do your research and seek expert advice before making the switch. 
  

How can switching help me access funds for home improvements? 


The market for green mortgages is growing. Green mortgages, available to those who want to make energy efficient home improvements, offer ‘green rates’ which are lower than conventional mortgage rates. In addition to lower rates, lenders also sweeten the deal by offering cashback incentives and discounts to homeowners who switch to green mortgages. This is enticing to homeowners who want to make improvements to reduce energy consumption and bills, while also enjoying lower rates and incentives. 
  
Upgrades eligible for green mortgages range from big projects such as installing solar panels and insulation, to smaller ones such as installing a new boiler. If you make energy efficient improvements which upgrade your home to a Building Energy Rating of B3 or higher, you can avail of green rates. 
  
When you switch your mortgage to access funds for energy upgrades, you can also avail of grants that will further fund your home improvement project. The National Home Energy Upgrade Grant provides grants for upgrading the energy efficiency of your home. The Sustainable Energy Authority of Ireland has issued a Guide outlining the process of obtaining the grant and completing the upgrades. The process is made easier through the introduction of One Stop Shops which will manage your home energy upgrade from start to finish. So, not only can you benefit from switching to a lower rate and getting a grant, but all the stress involved in making the upgrades is also minimised. 

How do I switch? 


Whether you’re switching to fix or switching to upgrade, the starting point remains the same – a Switcher Calculator. This will give you an idea of the rates out there and how much you can save by switching. Once you have this information, we will assist you with reviewing your current mortgage and whether the rates on offer in the market will benefit you. 
  
The switching process is straightforward. It requires research, compiling documents and appointing a valuer and solicitor. On average, it takes up to 12 weeks to complete the entire process and, as your broker, we will help you every step of the way, free of charge! 

Robyn Jacobs


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