Switching Mortgage Lender : Is it Worth it?

Switching your Mortgage Provider – is it worth it?
Back in the “Celtic Tiger” years most of the Irish banks were actively trying to get people to switch mortgages by offering lower rates and other incentives.  In 2006 the mortgage switching market made up about 15% of all new mortgages in Ireland.
In 2006 about 10,000 people switched their mortgage to a new lender.  By comparison – in 2014 , according to the Central Bank , less than 500 people switched mortgage lender.

In 2016 – some of the banks in Ireland  have again started offering incentives to attract switchers –  but how much can you save by switching?  Is it worth it? Mortgage brokers will usually try and push the idea of switching mortgages to try and get some business .

There are some costs involved in switching your mortgage  – you will need a property valuation and there will be legal fees too. On average – you can expect these two costs to come to about €1000. Below we show some comparisons that show a drop in interest rate of just 0.8% on a €240k mortgage  can result in possible savings of  over €12000 over 5 years.

An example ; A home owner owing 80% of the value of their house – i.e. a €240k mortgage on a €300k property. 80% LTV (Term remaining 20 years).
Current mortgage (variable rate ) is 4.25% – and repayments are  €1486 a month.
Total repayments over 5 years will come to  €89,160
After 5 more years of continuing with this mortgage the outstanding balance on the mortgage will be €197,554

We have compared some of the best  options for switching mortgage provider by calculating the savings made over a 5 year period.
Important Note :
Comparisons  assume  that any variable rates will stay the same for the 5 years. (They probably won’t)

 

Switch to Bank of Ireland at 3.45% for 5 years fixed.
Payments will be €1386 a month  .Total repayments of €83,140 over 5 years That is a reduction of €6020 .
The balance remaining after 5 years will be €194,510  – which is €3044 less than with the current mortgage
BOI also give cashback of 2% – which is €4800 on a €240,000 mortgage. Switching fees of €1000 to be deducted.
Overall Result with BOI   after 5 years :   Better off by €12,864


Switch to PTSB at 3.5% for 1 year  then 4% .
Payments will be €1392 a month for the first year then €1451 a month for the next 4 years. Total repayments of €86,350 over 5 years That is a reduction of €2810.
The balance remaining after 5 years will be €196,244  – which is €1310 less than with the current mortgage
PTSB also give cashback of 2% – which is €4800 on a €240,000 mortgage. Switching fees of €1000 to be deducted.
Overall Result with PTSB  after 5 years :   Better off by €7920

Switch to Ulster Bank   Fixed rate for 5 years at 3.6% ,  plus €1500 cashback.
Payments will be €1404 a month for the five years   – that’s total repayments of €84,255 over 5 years That is a reduction of €4905.
The balance remaining after 5 years will be €195,090  – which is €2464 less than with the current mortgage
Ulster give €1500 towards switching expenses  which we are assuming will cost €1000 – so that’s another small gain of €500 
Overall Result with Ulster Bank   after 5 years :   Better off by €7869

 

Switch to EBS at 3.5% : Payments will be €1392 a month – a total of €83,520 over 5 years which is a saving of €5640.
The balance remaining after 5 years will be €194,703  – which is €2851 less than with the current mortgage.   Switching fees of €1000 to be deducted.
Overall Result with EBS after 5 years :   Better off with EBS  by €7491

Figures updated Feb 16th   2016  –

Check out this page for details of the current  Lowest Mortgage Rates