If your home was built since 2015, or recently renovated, if your mortgage is above a specific threshold and even if you live in certain suburbs, you’re more likely to be in the sweet spot for a cheaper mortgage.
Switching to a better mortgage rate can save you hundreds of euro every month and thousands over the lifetime of your mortgage. Here’s how to know if you are in the mortgage switcher sweet spot.
How old is your home?
Was your home built or substantially renovated in the past 10 years? Then you’re likely to be in a mortgage switching sweet spot. Newer homes and those refurbished are more likely to have an enviable A or B energy rating. Banks are offering discounted mortgages for these.
Green mortgage rates are the lowest on the market right now. The lowest is a 3 per cent green rate, available to those with an A or B energy rated home. With standard rates ranging from 3.6 per cent to 6.65 per cent at the end of September, some homeowners could save as much as €617 a month if they qualify for the lowest green rate, according to figures from online mortgage adviser doddl.ie.
For example, if you have an A-rated home, valued at €700,000 with an outstanding mortgage of €250,000, you can qualify for AIB’s three-year green fixed rate of three per cent. If your energy rating is B3, they have a two-year green fixed rate of 3.15 per cent.
Dwellings built between 2015-2019 and 2020-2024 are substantially more energy efficient than those from earlier periods, with 95 per cent and 99 per cent respectively having an A rating, according to Central Statistics Office (CSO) data. Some 36 per cent of audited dwellings built between 2010-2014 received an A rating.
If your home is older than 10 years and you haven’t done a refurb, you’re likely to fall outside the sweet spot. Just 3 per cent of homes built from 2005-2009 are A rated.
You don’t need an A rating to qualify for the best rates, however – homes with a B3 rating or above will qualify for many green rates.
“Not all banks structure their green rates in the same way. Bank of Ireland offers a stepped rate discount based on BER down the scale, while PTSB have minor differentials of 0.1 per cent on some green rates,” says CEO of doddl.ie, Martina Hennessy.
If you built or bought your house before 2007, the year BER certs were brought in, and have never done a big renovation job, you may not even have a BER certificate. An energy assessment will cost you about €250. This will give you a BER rating and an indication of what you need to do to bring it up to a B-rating sweet spot. A certificate is usually valid for up to 10 years.
Where do you live?
Do you live in Kildare, Meath or Co Dublin? Then you’re likely to be in a mortgage switching sweet spot. About one in four homes here are A-rated dwellings. If you live in one of them, and you’re paying more than 3 per cent on your mortgage, then you might be missing a trick.
Do you live in Cabinteely, Carrickmines, Cherrywood, Foxrock, Loughlinstown, Kilternan, Sandyford, Shankill, Stepaside, Leopardstown or another part of Dublin 18? Almost four in 10 households in this postcode have A ratings – this is the highest number in the country. Some 38 per cent of households here are A rated and should qualify for the best mortgage rates.
Those in Dublin 20, where 29 per cent of homes have A ratings, and Dublin 13 where 27 per cent have A ratings are also hot to trot to their mortgage broker to check out the best green rates.
Things aren’t so sweet for those living in Cork city and Leitrim, however. Homes here are the least likely to have an A rating with just 4 per cent of dwellings there being A rated.
How valuable is your house?
Has your house increased in value since you bought it? Then you’re likely to be in a mortgage switching sweet spot. The ratio of how much you owe on your mortgage to how much your house is worth is called the ‘loan to value’ (LTV) ratio.
Most banks prefer a ratio of 80 per cent or below. Mortgages with an LTV ratio higher than that present a greater financial risk.
“If you have more than 20 per cent equity in your home, you may be eligible for a lower rate,” says Hennessy.
You don’t have to have bought your house yonks ago to hit the sweet spot either. National property price inflation was 9.6 per cent in the year to the end of July, according to CSO figures. So even recent home purchasers may stand to qualify for a better mortgage rate.
Take a homeowner who purchased a home mid-2023 for €400,000, paying a 10 per cent deposit with a mortgage of €360,000. House price inflation of 9.6 per cent, plus standard repayment of capital, should bring the loan to value to 80 per cent or under,” says Hennessy.
“Rates at the 80 per cent loan-to-value bracket are up to 0.55 per cent lower than 90 per cent finance,” she says.
Those who bought their homes in 2013, when property prices were at their lowest, are likely to have gained the most equity, greatly reducing their loan to value.
Got a mortgage of more than €250,000?
If you owe €250,000 or more on your mortgage, then you might be in a mortgage switching sweet spot. These loans are classed as “high-value mortgages”, says Hennessy, and so the banks want to get as many of these on their books as possible.
“Many lenders tier their rates by mortgage level, offering lower rates for mortgages of €250,000 or higher,” says Hennessy. “High-value mortgages can be up to 0.45 per cent lower than other mortgage rates,” she says.
That means those who owe less may not actually qualify for the best mortgage rates.
Did you borrow in a rush?
House hunting can be fraught. Sometimes buyers are so grateful to find a house and get a mortgage, the rate doesn’t get the attention it should.
“There are thousands of mortgage holders paying needless interest – some are paying up to 6.4 per cent on a mortgage when they may qualify for 3 per cent,” says Hennessy.
If your mortgage application was rushed, or didn’t get impartial advice at the time, this could put you in a mortgage switching sweet spot.
“It’s so important to understand what rate you are paying and see if you could save by switching,” she says.
If you don’t know what rate you are on, call your bank and ask the rate and your outstanding mortgage balance. The next step is to use the property price register to find out how much properties like yours in your area are selling for. Find out your BER too – by either getting an assessment done or checking the national BER register.
Armed with this information, use a mortgage comparison website or contact a broker to see if you are in a mortgage switching sweet spot. It could save you thousands. What could be sweeter than that?
You can contact us at OnTheMoney@irishtimes.com with personal finance questions you would like to see us address. If you missed last week’s newsletter, you can read it here.
