Brokers advise on mortgage options ahead of ECB rate hike

With the European Central Bank expected to raise its interest rate by 75 basis points later today, BusinessPlus.ie reveals what some brokers are advising on mortgage options.

Association of Irish Mortgage Advisers advises that one of the results could be that the number of mortgage loan changes will increase even faster.

Chair Trevor Grant said: “The Switches could eventually exceed the number of movers, which would be unprecedented. The volume of change requests has already exploded since the ECB raised its base interest rate by 0.50% in July.

“Following the ECB announcement, we expect the number of people looking to ditch standard floating rates, some trailing rates and even some existing fixed rate contracts with a relatively short expiry period, to increase. exponentially over the coming week and months.

He pointed out that currently, breaking an existing fixed rate agreement costs little or nothing.

“While July’s increase was the boost many mortgage holders needed to reassess their current terms, an even bigger increase will prompt thousands more to seek a better deal with their own lender or , more likely, with another lender.

“Switching has been accelerating for some time now, with increases of 150% and 148% in mortgage switching volume in June and July 2022 respectively. There is significant potential for changers to increase their share of mortgage switching. monthly mortgage activity.

“It’s not too late for thousands of mortgage holders to hedge against rising mortgage costs in the months and years to come. Given the continued growth of inflation, this could be the most effective savings program available to mortgage holders and they have the power to make it happen.

“People’s current lenders may well offer them the best terms, but it’s also worth bearing in mind that they don’t have to tell their mortgage customers if better terms are available elsewhere.”

With variable rate increases assured in the immediate future, Joey Sheehan pointed out that depending on the size of the ECB’s increase, borrowers with a €200,000 mortgage with 25 years to run could end up pay up to €24,668 in additional interest over the term.

Joey Sheehan online brokers MyMortgages.ie said the ECB’s rate hikes mean “every mortgage holder in the country should look at their current mortgage rate agreement to determine whether or not they could get a better rate of value, possibly over the longer term” .

He pointed out that while spreads on trailing mortgages are in most cases around 1%, some can be as high as 3%.

“Anyone with a margin of 1% or less should probably stick with the tracker and someone with a margin of 1.5% or more should consider repairing,” he added. “Between the two, it’s hard to call. If your tracker is 2% or more, you’re already paying more than you can fix before further rate increases.

With variable rate increases assured in the immediate future, Sheehan pointed out that depending on the size of the ECB’s increase, borrowers with a €200,000 mortgage with 25 years to run could end up paying up to €24,668 in additional interest over the term, with a monthly increase from just over €1,000 to just under €1,100.