Every six weeks, the ECB meets to review monetary policy. Since July 2022, we have seen rates increase ten times, bringing the refinancing rate to 4.5%. So, it was with bated breath that we awaited the ECB monetary policy meeting on June 6th, where the highly anticipated first-rate reduction was announced. The rate was reduced by 0.25%. Although cautious, this reduction leaves us with the anticipation of further cuts at the September and October meetings.
For tracker customers, the reduction is a welcome relief after ten consecutive rate hikes. A holder of a €200,000 mortgage over a 20-year term will now see repayments reduce by approximately €330 per annum, saving €6,500 in interest over the term. This will be further reduced in September when an additional adjustment of 0.35% will be applied to tracker holders, benefiting around 180,000 tracker holders in Ireland.
For customers rolling off fixed interest rates, of which there are nearly 70,000 in 2024, the decision of whether to stay or switch is critical. Irish lenders remind us that not all ten rate hikes were passed on and that all lenders have recently reduced their interest rates. Therefore, it is likely there will be little movement on fixed rates in the foreseeable future. If you are one of the 70,000 rolling over in the coming weeks and months, an unbiased conversation with a broker is most certainly worth your time. Rates are available at 3.45%, and many lenders are offering cashback and reduced documentation requirements as part of their switching offerings.
For the First-Time Buyer awaiting the keys to their dream home, what rate should you pick?
In my opinion, if you are buying a property that qualifies for the Green Rate, I advise you to fix your rate. Rates from 3.45% for four years are available. As you settle into your new home, you will need the comfort of knowing the exact amount of money going out of your bank account each month to budget and plan effectively. After the four years, or even before, you can review the market rates and see if there is a cost-saving opportunity by switching.
Main lenders including AIB, BOI, and PTSB have hedged their mortgage books towards Green Mortgages (BER Rating of B3 or above) with rates as low as 3.45% fixed for four years. AVANT has remained with a simpler approach, with their headline rate at 3.6% (80% LTV). ICS, while recently reducing rates, still struggles with the cost of funding and offers rates around 5%. Finance Ireland’s lowest rate is 5.35%.
A new entrant to the broker channel, MoCo, has been disruptive with their terms of mortgage lending, but their lowest rate is 4.6%. Nua Money is yet to debut, with an anticipation that they will come to market in
July. All lenders have different assessment approaches on Proven Repayment Ability, Net Disposable Income Assessment, and even how many points up the scale they go for public servants. It is definitely a case of not one size fits all, so getting the best advice upfront from a broker who is not aligned to just one lender is crucial.
A welcome shift in mortgage rates requires mortgage holders to review their largest monthly financial commitment to explore significant savings. For example, a customer with a balance of €300,000 remaining over 25 years may now be offered a 4.15% rate from their existing lender as they roll off their fixed rate. By switching to a new lender offering 3.6%, the monthly saving is €87, the annual saving is €1,044 (if you are like me, you would leave a utility provider for €50!). All things being equal on rate, the total term savings is €26,100, plus an additional interest saving of €26,100, totalling €52,212. As a broker, we will ensure you are matched to the best rate and most suitable lenders. So, do you have time for a quick 30-minute assessment call and a couple of hours to switch? It doesn’t cost you anything, as most lenders now offer cashback. Keep in mind that a 3.45% rate is still available for BER B3 and above properties!
Article by Margaret Barrett
Managing Director at Mortgage Navigators,