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Cake or Death? The Irish Mortgage Switching Conundrum

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