Rising property prices are doing the heavy lifting for mortgage-holders who want to get their loan-to-value ratio down.
But as financial planner and managing director of DNG Financial Cian Carolan says: “You can’t go down the shops and buy anything with that equity.” So what it can get you?
Well if you’re rolling off a fixed-term interest rate this year, it could potentially give you some of the better rates being offered by banks and financial institutions at a volatile time for inflation.
Economists’ eyes will be focused on Frankfurt this Thursday when European Central Bank (ECB) leaders meet to discuss raising interest rates.
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It’s widely expected we will see an increase of 0.25 per cent, bringing the interest rate to 2.25 per cent.
By the end of the year, it’s anticipated there’ll be at least another rate rise of 0.25 per cent as the ECB tries to keep a lid on inflation.
Tracker and variable rate mortgage-holders will instantly feel the impact of those hikes, while those who have fixed for a number of years will be insulated for the time being.
But if you’re coming to the end of a fixed-term cycle in the next year, Carolan says it’s time to get your ducks in a row now so you’re in a position to seize the best rate available to you then.
An increase in property prices, coupled with your repayments since the last time you fixed, should mean your loan-to-value ratio is now lower.
This potentially means you can avail of more competitive rates, closer to the 3 per cent mark rather than the hair-raising 4 per cent plus rates being quoted in mid 2026.
There are other ways to achieve those lower rates. Many lenders are offering what are called “green mortgages”.
Homes with a building energy rating (Ber) of A or B can qualify for green mortgage rates, and in most instances these are the best rates a lender will be offering at any given time.
In this episode of Better with Money, Carolan also explains “bridging finance”, why making your payments fortnightly may save you money in comparison to monthly, and he answers a question about how separating couples can (or cannot) buy each other out of a mortgage they took out together.
It’s the second part of a longer chat about mortgage strategising; how to pay off your home loan as quickly and painlessly as possible. You can listen to part one here.
These episodes are intended for information purposes only and do not constitute financial advice.
