Alison Fearon from Switcheroo.ie provides insights on the switching conundrum inspired by comedian Eddie Izzard
You may not be familiar with Eddie Izzard’s brilliantly funny sketch ‘Cake or Death’ (if not you can find it on YouTube) and while he was not intending to describe the choice of mortgage switchers, it’s a pretty good description of the binary choice mortgage customers face.
Many people say they just don’t have the time to switch. This is a flawed argument, as what people fail to understand is by not switching how much longer are they are effectively extending the term of their mortgage? People are making a poorly calculated trade-off between how much time it takes to switch and how much they can reduce their term by and how much money they will save. Do you know what this trade off looks like?
At Switcheroo.ie we have developed the Switcheroo Switching Matrix which shows this trade-off by calculating the overall cost of a mortgage across differences in rate and term.
Switcheroo Switching Matrix Scenario 1
Take our customer (in red box) who has a mortgage of €100k and is currently on a 3.0% rate and has 22.5 years left on their mortgage which will cost €137,639 over the full term. As their fixed rate ends, they move onto an SVR which is 3.5%, highlighted in red text to the right. While this increases their monthly payment by only €26 per €100k it brings their total mortgage cost to ~€144k. This is more expensive than if they extended their 3.0% rate by 2.5 years to over 25, (the exact term would be 26.3 years in this example). In Eddie Izzard’s sketch this would be ‘Death’.
Switcheroo Switching Matrix Scenario 2
Let take another scenario where the customer switches onto a lower rate. From the 3.0% they moved onto a rate of 1.95%. At this rate and the same 22.5-year term, the overall cost of the mortgage would reduce to €123,616 which is what they would have paid over ~15 years on the 3.0% rate, but with a much higher monthly payment. By switching they have reduced the overall cost of their mortgage to the same level as if they had reduced their mortgage term by 7.5 years and the required monthly payment increase. In Eddie Izzard’s sketch this would be ‘Cake’.
So, mortgage customers where are you on this matrix? and with fixed rates at extremely low levels (as low as 1.95%), what’s it to be ‘Cake or Death’? Register @Switcheroo.ie and find out what we can save you.
Instagram - @switcheroo.ie | LinkedIn - Switcheroo
Alison Fearon is Managing Director of Switcheroo.ie
Panda capital Limited T/A Switcheroo is regulated by the Central Bank of Ireland.
