Responding to the most recent Central Bank Retail Interest Rates for March 2022, Brokers Ireland said mortgage holders, and aspiring mortgage holders, need to act fast to get the best interest rates available in the market and for anyone looking to long-term security and predictability about their financial outlay to lock-in to the best rates for longer periods of up to twenty and thirty years, depending on circumstances.
Rachel McGovern, Director of Financial Services at Brokers Ireland said the international climate has changed utterly within a single month with European Central Bank policy makers who had previously dampened prospects around an interest rate rise now publicly acknowledging that a sequence of such interest rate rises are on the cards.
“We have previously advised that when a turn happens it can do so rapidly and surprisingly. Given recent statements from ECB policy makers it looks like we could be entering such a period.
“Even though ECB warnings are still coming with caveats around the timing our advice to all mortgage holders is to review your situation now, don’t wait, delays can be costly. There are still, given current market rates, extraordinary savings to be achieved by switching," Ms McGovern stated.
And she said even though Irish rates are still way ahead of the euro area average, with today’s figures showing the Irish weighted average interest rate on new mortgage agreements in March at 2.78 per cent while the euro average rate for the period was 1.46 per cent they are historically low.
“In the last 10 years we have come from the average fixed rate being as high as 4.85pc to today where the average fixed rate is 2.60 percent on new fixed rate agreements.
“Given what we’re seeing quoted from the ECB one would have to question, if at this stage Ireland is ever in the foreseeable future likely to move closer to the euro area average interest rate. 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.
“This is complex territory that could do with more light being shed upon it. Meanwhile people have to live their lives and pay their mortgages, and in this regard there is necessarily an element of guess work.
“However, we would advise not to guess in isolation. If in doubt do it with an expert adviser, and do it now,” 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 have been the real game changer in the Irish market in recent years," she added.
She said value conscious mortgage holders are switching in greater numbers, with recent figures from the Banking and Payments Federation of Ireland, showing switching/reportages increased by 42pc in volume terms year-on-year in February.
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.
