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Image Don't settle! One in five could save thousands on their mortgage by switching
Image Mark Whelan
Staff Writer

The Central Bank has just confirmed that one in five mortgage holders would save money by switching banks now. Yet, a mere 38 people a month are taking advantage. We take a close look at how much you could save and explain the switching process.

Don’t settle. You’ve heard it countless times before. It was Steve Jobs’ mantra and was probably your mammy’s advice to you when you were getting itchy feet in your old job. Now, we’d like to add our voice to that esteemed cohort of advisors. Don’t settle! Don’t settle for a mortgage repayment rate that you could reduce by switching providers.

The Central Bank has just released the results of its analysis of 522,407 mortgages in Ireland. The great news is that 21% of all mortgage holders could make some significant savings by switching provider. The not-so-great news is that a paltry 38 people a month are switching provider. People are settling.

Am I one of the 21%?

Just under half of mortgage holders wouldn’t actually save anything by switching provider due to the fact that they’re on tracker mortgages. If you’re one of these people, keep calm and carry on paying!

Over half of all mortgage holders aren’t getting the best rate currently on offer for a mortgage of similar structure and size to theirs. However, not everyone is actually eligible to switch.

One third of all borrowers could save money by switching mortgage providers but are hand-cuffed to their existing bank. If the outstanding amount on your mortgage is less than €30,000, you’re in negative equity or if you have arrears within the past 12 months, you aren’t allowed to switch. Sorry!

However, you’re almost certainly in the 21% of borrowers who could save by switching if you’re not on a tracker, you still have over €30k to pay and you’ve been keeping up with your repayments. Good for you!

How much could I save?

The Central Bank estimates that about 16,000 people could save more than €1,000 in the first year after switching and a whopping 27,000 could save over €10,000 over the full lifespan of a loan.

Let’s look at an example to break this down:

Say you took out a mortgage to buy a €200,000 home. And let’s assume you paid a €20,000 deposit and borrowed the remaining 90% (€180,000) to be repaid over 20 years.

The standard variable rate with one of our larger mortgage lenders is 4.5% for a Loan To Value of 80% or more. Which means a monthly payment of around €1,139.

Another well-known lender currently has a rate of 3.6%* for the same type of mortgage. Which means a monthly payment of around €1,053. Notice the difference? Of course you do! It's €86 a month, which is €1,032 a year. So, there's that grand the Central Bank is telling us we could save!

Does it cost money to switch?

Technically, yes. In reality, no.

There are some legal fees associated with switching mortgage providers, but the majority of lenders will cover most of these costs in order to woo you to their side of the fence.

Switching fees can sometimes mount to €1,300 but with lenders willing to cover at least €1,000 of this, the fees should not be a deterrent. And the Central Bank confirms that nearly 70% of people who switch would cover the cost of switching in as little as 12 months after taking the plunge.

How can I switch now?

Visit our mortgage comparison page to see how your existing mortgage stacks up against all other offers on the market. Just select the amount that’s outstanding on your mortgage, the repayment term and whether you’d like a fixed or variable rate to see your options.

You can then review the lender of your choice and proceed or request a call back from a mortgage specialist who will answer any questions you might have.

It’s a quick and (relatively!) painless process which could take a major chunk off your monthly mortgage repayments.

Why are so few switching?

We’re asking ourselves the same question! Only 38 switchers a month really is exceptionally low. The Central Bank reckons it’s due to people’s lack of understanding of the difference between morgage products and the perceived financial and non-financial cost of switching.

We reckon the main reason people aren’t switching remains that age-old Irish affliction called inertia – something the Central Bank’s report calls “naïve procrastination”. You hear murmurings about the savings that can be made by switching, you think to yourself ‘I must get around to that soon’, but then the phone rings or the kettle boils and the thought gets lost in the hustle and bustle of the day.

Make your bank jealous!

The Central Bank’s report suggests that switching numbers might be so low because some people who attempt to switch have had their new plan matched by their existing bank. So, just by taking the first few steps in the switching process, your bank may make you a counter-offer to stay! So, go attempt to switch and make your bank jealous!

Time to take control!

If everyone who could make savings by switching did so, it would send a strong message to the banks and could spark increased competition. A seismic shift like this would bring benefits to many more than the 21% of mortgage holders that could benefit from switching today.

Paying more than you have to on your mortgage is a symptom of a perceived lack of control in your relationship with your bank. Over 100,000 people could save money by switching today. Don’t settle when you could do better!

*This is a discounted KBC mortgage rate that requires customers to have a current account with KBC