Alison Fearon from Switcheroo.ie mortgages discusses the latest trends in the mortgage market
Tracker mortgages are home loans that have interest rates directly linked to the ECB rate. There is a fixed margin over ECB rates, so as the ECB rate rises, the cost of repayments for tracker customers increases accordingly. As the ECB has hiked rates over the last number of months this has translated into a direct rise in the cost of tracker monthly payments. So for the first time in many years, tracker customers have seen a sharp rise in the cost of their monthly repayments, which is leading them to look around for alternatives.
It’s worth noting that a considerable number of tracker customers initially obtained their mortgages with favourable rates. However, when they traded up they ported their tracker mortgages, which often resulted in an additional 1% added on top of the existing rate. As a result, many tracker customers are now paying as much as 5-6% on their mortgages. At these levels there are better deals in the market and many customers are abandoning their trackers in favour of the certainty that fixed rate products can offer.
For example, Avant Money offers a promising solution for tracker holders looking to switch their mortgages. Avant offers terms ranging from 5 to 30 years, with rates starting from 3.95%. This presents an attractive alternative for tracker customers who wish to escape the escalating costs associated with their existing mortgages.
To incentivise tracker customers to make the switch, Avant also offers €1,500 cashback towards legal fees for switchers with mortgages over €200,000. This financial assistance can alleviate the burden of switching costs, making the transition to Avant's lifetime mortgage even more appealing.
To better understand the potential savings, let's consider an example. Let’s say you currently have a mortgage of €300,000 with 15 years remaining on your tracker, set at 1.25% over the ECB rate (now 3.75%). This translates to a pay rate of 5%, amounting to approximately €2,370 per month. However, if you were to switch to a 15-year One mortgage with Avant at a rate of 3.95%, your monthly payment would reduce to around €2,210, saving you €160 per month. Moreover, Avant's contribution of €1,500 towards legal fees further eases the financial burden of switching.
To fully determine whether you should make the switch to a fixed rate or not, you will need to discuss with one of our mortgage experts to assess your current situation and as well as all of your options.
If you are considering this or any other mortgage product, be sure to get professional advice and register at Switcheroo.ie
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