EXPLAINER: Irish people told how to save €7,000 on mortgage and it's so simple

The average new mortgage drawn down has surged by 82pc over the past decade, the doddl.ie Mortgage Switching Index has shown as holders are told how they could save more than €7,000.

This dramatic rise from €189,940 in 2015 to €341,078 in the first three months of this year, reflects an equivalent increase in Ireland’s escalating property prices.

And it also means that any shift in interest rates is now having a dramatic financial impact on borrowers.

For switchers, the gap between the market’s highest and lowest rates now exceeds €7,300.

New figures from the latest Irish Independent doddl.ie Mortgage Switching Index show that even a small reduction in mortgage interest rates translates into substantial savings.

And for those on higher rates, the potential savings from switching can be game-changing, according to doddl.ie CEO, Martina Hennessy.

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The gap between the highest and lowest mortgage rates in the market now stands at 3.15pc.

For a borrower with the average mortgage of €341,078, this equates to a saving of €611 per month – or over €7,338 per year by switching from the highest to the lowest rate.

At the same time, strong property price growth has improved loan-to-value (LTV) ratios for many homeowners, making them eligible for far better mortgage rates than when they originally drew down their loan.

Despite a rebound in switching, which was up 77pc year on year in March, activity remains well below 2022 levels, pointing to widespread inertia.

Mortgage holders who remain loyal to their original lender – often one of the main pillar banks – could be missing out on tens of thousands of euro in savings by not exploring more competitive alternatives, according to Ms Hennessy.

“There has been a lot of change in the mortgage market over the last 18 months, competitiveness has improved with two new lenders entering the market and significant rate cuts,” she said.

The Index also highlights a shift in borrower behaviour, with over 20pc of new mortgages in 2024 drawn down on variable rates, compared to under 10pc in 2022, reflecting greater confidence that rates will remain stable or fall further.

An average variable rate on the Irish market is 4.15pc, but they range from 3.75pc right up to 5.65pc.

“As a result of this shift, we have seen real product innovation this year with the introduction of a new benchmarked variable product,” said Ms Hennessy.

“Avant Money’s Flex Mortgage product is benchmarked to the 12-month Euribor rate and currently starts from 3.04pc, and offers a huge opportunity for mortgage holders who have a preference for a variable rate to switch and save.”

Finance Ireland recently announced that they are ceasing new mortgage lending, meaning many of its existing customers are now rolling off low fixed rates onto some of the highest rates in the market (6.15pc).

"Mortgage holders rolling out of fixed rates with Finance Ireland certainly need to assess market options,” said Ms Hennessy.

“With no new mortgage lending proposition in place and servicing transferred to a third party, there is little incentive for rate competitiveness.

“A lot of mortgage holders are still basing decisions on brand comfort, but that comfort can come at a cost.”

Bank of Ireland and AIB are focused on the green mortgage space with their most favourable rates offered to those with A energy ratings, with one of AIB’s non-green rates set at 1.1pc higher than its green equivalent.

“The majority of homes in Ireland do not meet the BER threshold to avail of lower green rates,” said Ms Hennessy.

“However, the market has become more competitive for those who are not eligible for a green rate but who have built up equity in their home. They can still secure the lowest market rate, which is currently 3pc.”

With nearly 700,000 home mortgage in Ireland and large numbers still on uncompetitive rates, Ms Hennessy says the opportunity for mortgage holders to save by switching remains substantial.

"Now is the time to review your mortgage rate, explore the full market and make a proactive decision – not just for today, but for long-term financial wellbeing."