Your Money

Mortgage holders can save up to €600 a month by switching rates

Rates favour more energy efficient homes but savings of up to €7,405 are available to many homeowners

The more energy efficient your home, as measured by its BER rating, the better mortgage rate you will be able to access. Photograph: iStock
The more energy efficient your home, as measured by its BER rating, the better mortgage rate you will be able to access. Photograph: iStock
Conor Pope
Mon Nov 11 2024 - 09:17

Mortgage switchers can currently secure savings of up to €7,405 difference in annual payments with someone moving from the highest to the lowest rates available in the market saving over €600 a month, according to the latest doddl.ie Mortgage Switching Index.

At end of the third quarter, standard rates ranged from 3.6 per cent to 6.65 per cent, with the most attractive rates available to those with the most energy efficient houses.

With 94 per cent of new homes carrying an A rating, the leading banks are focused on attracting first-time buyers to build market share with green rates. In one case, the “green” rate available is 1.5 percentage points below the same lender’s non-green offering.

Given the widening gap, many homeowners who have borrowed to improve their properties – and their energy rating – may be missing out by not switching mortgage at the same time, according to the Martina Hennessy, chief executive of the online brokers.

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She said that almost one-third of homes with a BER rating of A or B are entitled to the best green rates on the market, which are really there to attract new business.

“However, homeowners who are C-rated and below are left paying a higher interest rate – a premium of 1.5 per cent in the case of AIB which recently introduced a 3.3 per cent, five-year fixed green rate against their 4.8 per cent non-green offering at 80 per cent loan to value,” she said,

Not all pillar banks structure their green rates in the same way. Bank of Ireland offers a stepped rate discount as you go down the BER scale, while PTSB has minor differentials of 0.1 per cent on some green rates.

“With the average BER rating at a C, those with a poorer energy rating are being left out in the cold somewhat,” Ms Hennessy said.

October saw the ECB drop its main refinancing rate to 3.4 per cent and mortgage lenders in Ireland have also since cut rates – cutting the highest rate to 6.4 per cent and the lowest standard non-Green rate to 3.4 per cent from November.

Lower mortgage rates have led to an increase in switching, with volumes up 30 per cent on the second three months of the year.

There are now 12 mortgage lenders in the Irish market, with the arrival of Nua Money and MoCo this year, giving consumers the most choice they have had in over a decade.

According to Doddl, the number of people topping up their mortgage has also increased by 26 per cent annually, with the average amount of equity released standing at €121,864.

These are most commonly used for home improvements, or consolidating existing home improvement loans.

“Releasing equity out of your home to clear previous home improvement loans can be cashflow positive due to the longer term of a mortgage,” Ms Hennessy said.

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Conor Pope

Conor Pope

Conor Pope is Consumer Affairs Correspondent, Pricewatch Editor