Getting your finances in order for 2020?
It might be a good idea to start by taking another look at your mortgage; a new report suggests that 150,000 – 200,000 Irish mortgage holders are significantly overpaying but are reluctant to switch to lower rates.
According to the Association of Irish Mortgage Advisors (AIMA), this reluctance to switch is hindering market competitiveness and generally keeping rates high.
The volume of mortgage switching remains at one-quarter of what it was at the peak of the boom.
AIMA say the latest BPFI report on Mortgage Drawdowns found that less than 5,887 switched in the last 12 months – compared with 25,937 in 2007.
“We believe that less than one in five of these households are on the best available rate and therefore the majority could save by switching.” says Trevor Grant, Chairperson of AIMA.
“In addition, if more people switched, the banks would be more likely to lower their rates to protect their market share – this is simple economics.
“It is advised that mortgage holders review their rate and mortgage agreement every two years to ensure they are getting the best value – but in the last two years, just over 10,000 mortgage holders switched – out of a possible 150,000 – 200,000. This figure is far too low – ideally, 30,000 SVR homeowners need to switch each year.”
What’s holding you back?
Mr. Grant, went on to comment on other factors he believes hold people back when it comes to moving rate and/or lender.
“Many people got the best deal available at the time when they took out their mortgage and they understandably assume it is still the best. However, the reality is that rates become out of date in terms of value. Others believe that if they remain loyal to their current bank, it will be reciprocated in some way – which is an absolute fallacy.
We also find that many on a fixed rate believe they simply can’t break their fixed-rate contract and have to wait until it’s finished to make a move – again this is another falsehood that permeates the market and costs households money.”