Brokers Ireland advises homeowners to ‘lock-in’ now for best mortgage rates

Responding to the most recent Central Bank Retail Interest Rates for April 2022, Brokers Ireland said mortgage holders who have not reviewed their mortgage rate need to act fast to get the best value available in the market.

Anyone looking to long-term security and predictability about their financial outlay should look to lock-in to the best rates for longer periods of up to twenty five years, depending on circumstances.

“Given the public statements by the European Central Bank there is little doubt now but that we’re on the cusp of a new era in terms of interest rates. While we don’t know the shape it is going to take, especially given geopolitical volatility, current rates, even though well ahead of the euro area average, are the lowest we have seen and are unlikely to maintain at that level for long,” Rachel McGovern, Director of Financial Services at Brokers Ireland, said.

She said given current market rates, extraordinary savings can be achieved by switching.

The figures show the Irish weighted average interest rate on new mortgage agreements in April at 2.77 percent, slightly below last month’s figure while the euro average rate for the period was up to 1.59 percent, narrowing the gap to 1.18 percent.

“In the last 10 years we have come from the average fixed rate being as high as 4.85 percent to today where the average fixed rate is 2.59 percent on new fixed rate agreements.

“The rationale we’ve been given for our higher interest rates relates to complex historical data arising from the last recession, along with other factors such as lenders ability to recover losses on defaulting mortgages.

“Meanwhile people have to live their lives and pay their mortgages. We would advise anyone in doubt about the best move is to consult a broker who will advise the best move to make in line with one’s particular circumstances. Do it now because any delay is likely to prove costly,” she said.

Ms McGovern said any ECB interest rate rise has the potential to impact all but those on fixed interest rates. A €250,000 fixed mortgage over a 20-year period at 2.75 percent repayment would be €1,355 per month for the entire term of the mortgage. Regardless of rate changes this individual’s repayments cannot be increased.

“However, fixed rates could go higher for new mortgage holders. If the rate were to increase by 1.25 percent, bringing it to four percent, this would equate to a repayment of €1,514 per month, over €38k more over the term of the mortgage.

“Long-term fixed interest rates, relatively new in Ireland, have brought best value in the Irish market in recent years,” Ms McGovern concluded.

And she advised mortgage holders when switching to concentrate on the interest rate and the term for which it is available and not to be tempted by short-term incentives, such as once-off payments and cover for legal or other services.

She said the 1.18 per cent margin over and above the euro area average that Irish mortgage holders are now paying is costing them over €2k per year more than their euro area counterparts and almost €65k over 30 years on a €300k mortgage.

 

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