Time is now ripe to consider switching mortgage provider

As the Central Bank’s retail interest rates reveal a continuing gap, 1.46 percent for June, between Irish and euro area mortgage holders, with Irish consumers paying this excess (2.79 percent Irish versus 1.33 percent euro area average ), the writing may be on the wall for this high level of divergence, given the entry of more competition into the Irish market, Brokers Ireland has said.

Rachel McGovern, Director of Financial Services at the organisation, which represents 1,225 broker firms, noted a potential U-turn change in this regard.

“We may be about to see a U-turn on the stated position that there was a particular rationale as to why Irish lenders could not match the type of euro area rates that are more the norm.

“The entry of competition from Avant Money in the autumn is already showing pressure for movement, with PTSB lowering its rates and extending those lower rates to existing customers also,” Ms McGovern commented.

She said Brokers Ireland has always maintained that mortgages are products for which lenders can borrow with long-term certainty, “defying any rationale as to why they should be different.”

On the most recent mortgage interest rate data, Ms McGovern noted that Irish mortgage holders are paying a full 1.46 percent more than their euro area counterparts. This differential costs Irish consumers over €79k on a €300k mortgage over 30 years.

She said while more mortgage holders are now switching to get better rates, not enough are doing so.

“There are tremendous savings to be by switching and lenders see it as an area in which to compete for people with good repayment capacity,” Ms McGovern stated.

She encouraged those who have not reviewed their mortgages for some time to do so, saying the switching process has become a lot easier than in the past.

“It also has the beneficial effect of further driving competition between lenders. If in doubt contact your broker who will undertake the work for you,” she said.

Ms McGovern noted the difference in interest rates for SMEs borrowing less than €250,000.

“Irish SMEs are being absolutely fleeced by comparison with their euro area counterparts, paying 5.37 percent compared with 1.77 percent in the euro area, a full 3.6 percent more than the euro area average,” she said.

COVID-19 payment breaks of vast magnitude

Responding to the most recent Central Bank study on COVID-19 payment breaks, Brokers Ireland said it is hardly surprising given the magnitude of the shutdown of the economy that Irish borrowers should avail of breaks representing over €20 billion, in loans with 60 percent being household and 40 percent business.

Rachel McGovern, Director of Financial Services at Brokers Ireland which represents 1,250 Broker firms, said it is what happens from here on in, from now until the end of the year in particular, that will dictate how individual borrowers and businesses will recover.

“Confidence may be a nebulous enough concept but in reality it is powerful. If lenders behave in a cautious fashion that goes beyond what is reasonable or prudent it will destroy confidence among builders to build badly needed new homes.

“This kind of pulling in of horns helps no one, consumers, businesses and ironically lenders themselves,” Ms McGovern asserted.

She advised mortgage holders who are back at work to get back to repaying their mortgages as soon as they can.

“It may be tempting to avail of the break for the full term it’s been granted for but if you can afford to repay it’s best to do so since many lenders will charge interest for the period anyway and you will end up paying more in the long run.”

She pointed out that the most recent report shows inquiries related to new mortgage applications for individuals fell by almost a fifth between February and March 2020 and that if such trends were to continue, there may be implications for demand in the housing market in the coming months.

Ms McGovern said report after report from the Central Bank demonstrates that Irish mortgage holders and SMEs continue to pay interest rates way in excess of their Euro area counterparts.

“For far too long the vital SME sector has got little more than lip service from policymakers, despite comprising 99 percent of active enterprises and employing 65 percent of employees.

“They have consistently been told how vital they are to the economy but through and beyond the last financial crisis there has been little in the way of action to support such sentiment.

“The proposed governmental group to co-ordinate State support for SMEs needs to be more than just another quango,” Ms McGovern concluded.


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