Commenting on the most recent Central Bank report on retail interest rates for April, Brokers Ireland said given the COVID-19 pandemic was at its height during the month, the 40 percent drop in the month in new mortgage agreements is not surprising at one level but at another the magnitude of it is likely to signal a much more cautious lending attitude by lenders, as well as consumers.
Rachel McGovern, Director of Financial Services at Brokers Ireland, which represents 1,250 Broker firms, said the next few months will be telling.
“A lot now depends on how quickly the country can recover from the devastation of the pandemic and how employment levels will hold up,” she said.
She said the data ties in with Brokers Ireland’s own recent research which found almost 95 percent of mortgage brokers had seen a drop off in new mortgage applications and of these more than six in ten said the level of drop off was 75 percent and over.
“It revealed a number of reasons for this drop off. More than one in every two said it was as a result of temporary job loss, followed by temporary income reduction, and prospective buyers holding off hoping to buy later for a lower price and banks imposing new restrictions,” Rachel added.
On this most recent interest rate data, Ms McGovern noted that Irish mortgage holders continue to pay 1.49 percent more on average than their euro area counterparts.
“Since your mortgage tends to be the biggest outlay from your income, and the fact that its repayable over a very long time, typically 25 to 30 years, the consequences of even a half or one percent differential are huge,” she continued.
“This differential, 1.49 percent, costs Irish consumers over €80k on a 300k mortgage over 30 years. There are tremendous savings to be got by doing so, and lenders are now encouraging switching, seeing it as an area in which to compete for people with good repayment capacity,” Rachel emphasised.
She said those who have not reviewed their mortgage rate for some time should do so.
“Many mortgage holders are unaware that most lenders have a lower interest rate where there is a better LTV, or loan to value ratio. If your home has increased in value in recent years, as most have, and you have not reviewed your mortgage, chances are you’re entitled to a reduced rate of interest.
“Switching has become easier as a result of new Central Bank regulation in recent years. If in doubt consult a broker,” she concluded.
