Only 1% of mortgage holders likely to switch lenders despite potential savings

Just 1 per cent of Irish homeowners are expected to switch their mortgage this year even as the overwhelming majority of customers would save money by doing so, new analysis by Daft has indicated.

The report by Daft Mortgages, part of the Daft property website, suggests 87 per cent of mortgage holders would save an average of €90 on their monthly repayments by getting ahead of expected rate hikes and switching their mortgage to another provider in 2022. Overall, homeowners could save an average of €8,900 over the next four years by switching and fixing their rates.

The report is based on analysis of more than 150 mortgage holders who requested a personalised switch and save report from the company, coupled with a survey of more than 250 mortgage holders. Daft also concluded that about 96 per cent of mortgage holders would save over the next few years by fixing their mortgages to lock in current rates. This is based on an assumption that mortgage interest rates will rise 2 percentage points over the coming years.

However, the survey indicates that just 1 per cent of Irish mortgage holders are likely to do so, with almost half of the 250 respondents indicating that they didn’t know they would save money by switching. Some 40 per cent of respondents, meanwhile, said they haven’t considered switching because of the effort involved.

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The report shows the challenges facing mortgage holders, with many facing rising interest rates for the first time after more than a decade of rock-bottom rates as central banks fight to tame inflation. While the main Irish retail banks are yet to pass on the European Central Bank’s moves to consumers, Finance Ireland on Monday became the latest nonbank lender to raise its variable and fixed rates for its mortgage products, by between 1.5 per cent and 2 per cent. Spanish lender Avant Money has increased its fixed rates twice since the start of the year, while ICS Mortgages plans to increase its fixed rates for new owner-occupier mortgages by 0.5 per cent from this month.

Almost a quarter of respondents said they would not change providers because they thought being on a fixed-rate barred them from switching. Most banks are not yet charging customers so-called break fees for switching. That makes it “the perfect time” to consider it, said Paul Monahan, general manager at Daft Mortgages.

“I’d advise any customer on a fixed-rate mortgage to call their lender and ask how much it would cost them to break – it’s definitely free just to find out,” he said.