Revealed: mortgage switch savings reach €3,400 a year

Beat the banks: Home-loans gap has widened by almost €900 in past year

Thousands of homeowners are needlessly overpaying their banks because of their failure to switch mortgage lender.

The cost to the average mortgage holder has now reached €3,400 a year - a rise of almost €900 since a year ago.

The Irish Independent Mortgage Switcher Index calculated the potential savings, based on the spread between the highest and lowest interest rate on the market.

It found that the gap between the current available rates has grown to 2.2pc.

Over a month, this amounts to a saving of €281 for the average home mortgage, according to the index produced by switching platform Doddl.ie.

There is a golden opportunity to switch as homeowners have risen out of negative equity, so common during the recession, while Central Bank rules have made switching easier.

Some banks are even offering cash lump sums to switchers.

Switching rates has increased lately but many homeowners are still reluctant to move their mortgage to a different lender.

Some are unaware they can switch, with others fearful something will go wrong.

But experts said the reluctance to switch was costing homeowners dearly.

The Mortgage Switcher Index highlights the huge difference between the lowest and highest interest rates on the market.

Variable rates as high as 4.5pc are being charged to homeowners, but rates as low as 2.3pc are available.

Discounted mortgage rates have been ignored by the experts who compiled the index.

The managing director of Doddl.ie, Martina Hennessy, said a typical homeowner on a 25-year mortgage is paying €1,335 a month.

This same homeowner could cut their monthly repayments to €1,054 by switching. This would give an annual saving of €3,372 a year - which is about the same as the average monthly salary for an Irish worker.

For a family with a larger mortgage of €300,000, annual savings of €4,200 can be made.

The rate of mortgage switching has more than trebled in the past four years, Ms Hennessy said. But she added that thousands more homeowners could benefit from making the move.

She said just 5pc of mortgage loans at the end of 2015 were switched. This had jumped to 14pc at the end of last year.

"Consumers are becoming more aware that switching can save them money, mainly thanks to Central Bank requirements on lenders to make mortgage switching easier," said Ms Hennessy.

She added that property values have increased. This means loan-to-value ratios have gone down, also making it easier to switch.

Many lenders have tiered rates, with lower interest charged for those with lower loan to values.

And many banks provide a lump sum amount to help defray the cost of the switching, such as conveyancing fees. The banks call these switcher packs.

"These switcher packages range from value €1,650 to up to 3pc of the mortgage amount outstanding back in cash.

"The easier it becomes to switch, the more people will realise that they are not tied to one financial institution if there are better rates on the market," Ms Hennessy said.

The launch of the new switching index comes at a time when banks are continuing to cut their mortgage rates.

Permanent TSB became the latest to give borrowers a break. It has reduced its fixed rates for new customers and those switching to it.

Ulster Bank this month reduced some of its mortgage rates, ICS Mortgages launched into the residential market, with some of the lowest rates, and KBC last month cut its rates.

It comes as the European Central Bank piled pressure on banks in the eurozone to lend more to homebuyers after it reduced the interest rate it pays banks that deposit money with it.

This is a way to force banks to lend more, instead of depositing money with the ECB.

Almost half of properties snapped up by cash buyers

 

Almost half of all the residential properties bought last year were purchased with cash or savings.

Some 25,000 properties were bought without the need to take out a mortgage.

This was not far off the level in the recession years, when numbers approved for a mortgage fell to an all-time low.

A total of 55,000 homes were bought last year, according to the latest quarterly Consumer Market Monitor from the Marketing Institute of Ireland and UCD Michael Smurfit Graduate Business School. This was an increase of 8pc on 2017.

Almost 25,000 were bought with cash, a figure which represents 45pc of total transactions.

Author of the report, Prof Mary Lambkin, said the numbers who were able to buy with cash was similar to the 2009 to 2013 period.

"In the absence of mortgage finance, almost half of the homes purchased relied on cash and savings, similar to the recession years when mortgage approvals were at an all-time low."

Separate research from the Central Bank last year found cash buyers more likely to snap up cheaper properties than dearer ones.

This meant modest homes are seeing the biggest price rises.

This is mainly because cash buyers are more active in the lower-end of the housing market, pushing up prices of smaller homes in less desirable areas.

This means there is a limit on the ability of the Central Bank's lending rules to control prices, a study by economist Edward Gaffney found.

Cash buyers include corporates and non-government agencies.

They also include householders using equity from their home, or a bank deposit, to finance the purchase of a buy-to-let.

The Consumer Market Monitor found the property market is growing, but the report shows the number of homes bought last year was about half the amount purchased during the height of the last boom in 2005.

Back then some 105,000 homes were sold.

Last year saw an increase of 12pc in the number of mortgages issued, with 30,629 drawn down.

This is way down on the 85,000 mortgages issued in 2005. The monitor also showed that while market growth was sluggish, demand remains high for housing.

Prof Lambkin said supply was failing to meet demand for properties, because 35,000 new homes are needed every year.

Over the next decade some 350,000 new homes will be needed to satisfy demand.

"The consumer economy is performing well in most areas, but the residential property market is still lagging behind.

"There were 55,000 homes sold in 2018, an increase of just 8pc year-on-year, a rate of growth that has remained consistently low over the past five years.

"This compares to the boom years of 2005-2007 when over 100,000 homes were sold each year."

Prof Lambkin said the property market's sluggish growth does not reflect the large increase in the working population and the rate of new household formation over the past five years.

The number of homes for sale has increased to approximately 23,500, but the level of property sales should be about double the current level.

The report said 15,000 new units were built in 2017, 18,000 in 2018 and another 20,000 and 23,000 new homes set to come on stream this year and next year.

The report said there would be 2.35 million housing units in the State if the needed 350,000 new housing units are built over the next year.

Irish Independent

Positive Developments for Tramore

The future of Tramore’s town centre has a much more positive outlook as we enter 2019 after a number of important developments during 2018. The most significant of these was the announcement last month of €1.35 million in Government funding for public realm works which will help revitalise the town centre. Works will include new hard surfacing, stone paving, upgraded lighting, new street furniture and landscaping for the areas around Main Street, the Square, Broad Street, Strand Street and Market Street. The plans also include changes to traffic circulation and the introduction of shared space areas. The hope is that this area, in the heart of Tramore, can be used for artisan markets, open air gigs and generally as an attractive meeting area in the town centre.
Whilst it will be 2020 before we see these works commence, in the meantime Waterford City & County Council have been investing €100,000 on remedial works on the Old Railway Station building after acquiring it last year from NAMA. These works will make the building structurally sound and thus enabling it to be used for possible community enterprises into the future.
Behind the Old Railway Station the site that was once occupied by Celtworld has been acquired by Aldi after they were granted planning permission by An Bord Pleanala. Whilst an Aldi might not be everyone's ideal venture for this location the reality is that without their acquisition of the site the probability was that the site would remain derelict for the considerable future. An Aldi store in this location will clean up the area and bring badly needed footfall to that end of the promenade.
In another positive signal for the future of Tramore, two hotels which we were lying idle for years changed hands during 2018. The old Tramore Hotel located at the top of Strand Street was sold at auction and Property Partners Barry Herterich negotiated the sale of the Waterfront Hotel at the bottom of Gallweys Hill to Seamus Walsh, owner of Waterford Castle Hotel. The Waterfront will open in the coming months and will have one of the best beach front terraces in the country. Whilst Mr. Walsh is prepared to invest in Tramore, unfortunately the same cannot be said of the owners of the Grand Hotel despite a Dereliction Order notice on the property.
Property Partners Barry Herterich also negotiated the sale of The Victoria House on Queen Street last year and it was great to see 'The Vic' buzzing over the Christmas period. Queen Street will also benefit from the opening of the Copper Hen restaurant, Fenor's loss is certainly Tramores gain. Finally 2018 saw the end of Tramore Chamber of Tourism and Commerce after it integrated with Waterford Chamber. I would like to take this opportunity to thank all past Board members for their contribution to Tramore Chamber. The decision to integrate with Waterford is also an indication that Tramore is upping it's game. The future looks positive for Tramore town centre.