Mortgage holders ‘must think long term’ to avoid shock rates

by Gazette Reporter
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Homeowners should consider swapping their short-term fixed mortgage rates for longer-term options to protect themselves against shock increases in repayments when their current deal ends, the latest Mortgage Switching Index has found.

Mortgage switching activity has jumped 33% year on year, fuelled by an expectation that rates will increase this year. 

The risk for those on short term fixed rates is that if they roll out of their contracts in 12 or 24 months, rates could be considerably higher, according to mortgage expert Martina Hennessy, Managing Director of

As household costs rapidly rise, homeowners could be needlessly paying an average €4,388 in extra mortgage repayments per year by not switching lenders, the Q1 Mortgage Switching Index has found.

This figure increases to €4,468 if your building energy rating (BER) is B3 or above and you are eligible for a Green mortgage with the introduction of a market leading fixed rate of 1.9%.

The index is based on the average mortgage drawn down for new lending in both the first-time buyer and second-hand mover markets as at Q1 2022, currently €272,091.

There are still over 200,000 households repaying their mortgage on standard variable rates of up to 4.5%, whereas the lowest available rate on market is now a fixed 1.95%.

The prospect of an expected increase in mortgage costs is prompting a significant number to switch from variable or short term fixed rates and beat the expected increases.

“There is still time to lock down a strong fixed rate to safeguard against what could be multiple rate increases,” said Martina Hennessy, Managing Director of

“Many existing mortgage holders have never experienced interest rate increases as we have been in a flat rate environment for the last 14 years.

“Mortgage rates have already started to rise with both ICS Mortgages and Avant Money having recently increased theirs, with others expected to follow.

“Irish consumers have tended to favour short-term fixed mortgage rates with terms of 3 and 5 years the most popular choices.

“However, there is now a shift to 5, 7 and 10 year products to lock down rates and ensure security over repayments in the medium to long term.”

Over the last two years, longer term fixed rates, which were previously unattractive due to pricing or unavailable due to lack of competition, have become more accessible.

Whole of mortgage fixed terms, something which is commonplace in Europe, have also been introduced.

“It is worth investigating whether it is worth breaking out of an existing short term contract to lock into a longer term offering,” said Ms Hennessy.

“If you are currently fixed on a short term rate it is worthwhile contacting your mortgage lender to confirm if you would be subject to a break penalty.

“You can then decide whether it makes sense to lock in to a longer term or switch to a more competitive provider.”

The market has seen an increase in mortgage holders switching from exiting lenders Ulster Bank and KBC Bank, where their mortgages have been sold to Permanent TSB and Bank of Ireland respectively.

While Ulster Bank and KBC had offered some of the most competitive rates on market, Permanent TSB and Bank of Ireland are generally higher and they also offer different rates to new and existing customers.

“A mortgage is generally a household’s largest outgoing. If rates start to increase this will cause further stress on income in an inflationary environment,” said Ms Hennessy.

“Existing mortgage holders really need to take control of their mortgage, understand what their interest rate is and how they could dramatically reduce their outgoings.”

Sample caption: There is still time to lock down a strong fixed rate to safeguard against what could be multiple rate increases, said Martina Hennessy, Managing Director of

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