Since 2013, Irish house prices have had 7 straight years of steady growth, which has brought a level of confidence and stability back to the national property market.
But whilst the number of house and apartment sales and new housing developments get the headlines, there is another, significant effect of increasing house prices.
It has enabled people to get some equity back in their homes, so regardless of whether you were sitting in negative equity or are seeing your home value grow, chances are your LTV ratio has changed.
This could make you eligible for preferential mortgage rates saving you significant money over the life of your mortgage
Mortgage Rates at an all-time low.
Interest rates range from as low at 2.3% up to 4.5%.
Europe’s fiscal policy has driven down bank interest rates, leading to all-time low mortgage rates as those on variable rates will already be very aware. Fixed-rate mortgages for new borrowers have tracked down at a similar rate offering considerable savings for switchers and those renewing their rates.
In any event, the rising house prices and falling mortgages mean it’s an ideal time to review your existing mortgage to see can you get a better rate and potentially save you thousands over the remaining term of your loan, or release funds to renovate or extend your home.
Know your LTV
If you’ve owned your home for a number of years, chances are your mortgage rate is too high.
Most lenders offer rates based on the loan to value ratio on both variable and fixed-rate mortgages. This means that the lower the loan balance is compared to the value of the property, the better the rate.
This LTV is calculated by dividing how much you still have to pay on your mortgage by the current market value of your home.
So, if a homeowner purchased for €300,000 and borrowed €270,000, their LTV would have been 90%.
However, with increasing property values and you paying off the loan, your loan to value now could be between say 60%-80% (or lower), meaning you fall into a lower band, with a better rate.
So, if the homeowner bought 10 years ago, their home may have increased in value by 15%, and they could have paid off €75,000 of their mortgage, dropping their LTV to 57%.
Now you could avail of a lower rate compared to that was originally offered to you by your lender by switching your mortgage to a cheaper lender.
Switching has never been easier.
“Re-mortgaging” or “switching” lender need not be daunting or complicated.
According to Turlough Meagher of IFG Financial, “ The process has been made more streamlined and many lenders provide some financial support to cover the costs of switching lender (mainly legal and valuation costs) by way of set sums (e.g. €3000 from KBC) or up to 3% of the loan amount.”
Picking the best offering
Whilst the process is much simpler, the range of options can be a bit overwhelming. Choosing the right provider, product, rate and duration for you has to take your personal circumstances and plans into account.
According to Turlough, “The important thing is to seek the correct advice, using a broker allows you access to many different lenders in one go, saving you time and hassle of having to deal with the lenders directly. A broker will provide you with options to choose from and cut through the lender jargon to enable you to make an informed decision. “
Make sure you’re not paying too much.
As the house prices rise and mortgage rates drop, there has never been a better time to review your mortgage rate and ensure that you’re not paying too much for your mortgage.
Providers are making it easier and quicker to switch your mortgages, but it’s still a complex product.
It makes sense to discuss your situation and requirements with a qualified independent financial advisor to ensure you get the best deal for you.
If you want to discuss your options with Turlough, you can email him on