IMPLICATIONS OF ECB INTEREST RATES
IMPLICATIONS OF ECB INTEREST RATES
Rising for
Mortgage Customers
IMPLICATIONS OF ECB INTEREST RATES
Rising for Mortgage
Customers
Many mortgage customers are now having to pay more than expected and the prospect of changing lenders is a real consideration. People’s affordability for a mortgage is also down and there is a fear of future increases to the ECB rate. But in order to better understand the implications of these recent changes, it’s important to know more about the role of ECB interest rates.
The European Central Bank has increased rates from historical lows to tackle rising inflation but what does that mean for mortgage customers in Ireland?
Why ECB Interest Rates are
Affecting Mortgage Customers
People are really starting to feel the pinch in their pockets due to soaring energy prices and the high cost of living. The European Central Bank is tackling this crisis by increasing their reference ECB interest rates and this has led to banks increasing loan rates for any business or household that needs to borrow.
As a result, debt becomes more expensive and less people are likely to apply for a loan. Many customers are thinking of switching to a different mortgage product or even a new lender for a lower interest rate. But that’s not all, because banks carry out a thorough analysis of finances for all mortgage customers and because people are spending more than ever due to inflation, they may no longer have the cash flow or ability to afford a new or different mortgage.
This not only matters for those who want to switch to a different provider but also new mortgage applicants. In fact, new mortgage customers have it especially hard because it’s also necessary to produce a 10% deposit. The cost of inflation has reduced the amount of money available to go towards savings and it’s simply not possible for many people to save for this deposit.
Why ECB Interest Rates are
Affecting Mortgage Customers
People are really starting to feel the pinch in their pockets due to soaring energy prices and the high cost of living. The European Central Bank is tackling this crisis by increasing their reference ECB interest rates and this has led to banks increasing loan rates for any business or household that needs to borrow.
As a result, debt becomes more expensive and less people are likely to apply for a loan. Many customers are thinking of switching to a different mortgage product or even a new lender for a lower interest rate. But that’s not all, because banks carry out a thorough analysis of finances for all mortgage customers and because people are spending more than ever due to inflation, they may no longer have the cash flow or ability to afford a new or different mortgage.
This not only matters for those who want to switch to a different provider but also new mortgage applicants. In fact, new mortgage customers have it especially hard because it’s also necessary to produce a 10% deposit. The cost of inflation has reduced the amount of money available to go towards savings and it’s simply not possible for many people to save for this deposit.
How the ECB Rate Affects
Different Types of Mortgage
There are three main types of mortgage product in Ireland and you will either have a fixed, variable or tracker mortgage. Here’s a quick breakdown in terms of how each type of product may or may not be affected by the ECB rate
1. Fixed Rate Mortgage
You know exactly what you will pay with a fixed rate mortgage, no matter if the ECB decides to increase rates or not. The lender agreed to a specific rate for a set period and some agreements will last the lifetime of the mortgage. In other words, when you are on a fixed rate you are protected from rising ECB rates.
2. Variable Rate Mortgage
The interest rate can go up or down with a variable rate mortgage. Such changes are mostly due to changes in the capital markets, but the banks have full discretion as to the size and timing of any rate changes.
3. Tracker Mortgage
While a tracker mortgage is a type of variable mortgage, it tracks a fixed indicator (ECB rate) and moves directly in line with any change in the rate. This means mortgage payments are increasing with every month the ECB decides to increase the base rate. More on trackers in a moment.
But what about changing products or switching to a different provider? It depends on the type of mortgage you have at the moment.
How the ECB Rate Affects
Different Types of Mortgage
There are three main types of mortgage product in Ireland and you will either have a fixed, variable or tracker mortgage. Here’s a quick breakdown in terms of how each type of product may or may not be affected by the ECB rate
1. Fixed Rate Mortgage
You know exactly what you will pay with a fixed rate mortgage, no matter if the ECB decides to increase rates or not. The lender agreed to a specific rate for a set period and some agreements will last the lifetime of the mortgage. In other words, when you are on a fixed rate you are protected from rising ECB rates.
2. Variable Rate Mortgage
The interest rate can go up or down with a variable rate mortgage. Such changes are mostly due to changes in the capital markets, but the banks have full discretion as to the size and timing of any rate changes.
3. Tracker Mortgage
While a tracker mortgage is a type of variable mortgage, it tracks a fixed indicator (ECB rate) and moves directly in line with any change in the rate. This means mortgage payments are increasing with every month the ECB decides to increase the base rate. More on trackers in a moment.
But what about changing products or switching to a different provider? It depends on the type of mortgage you have at the moment.
Should You Switch to a Different
Mortgage Provider/Product?
Fixed rate mortgages are protected and there will be no immediate impact from any rise or fall of the ECB interest rate. However, variable rates can change at the lenders discretion and given the current economic climate, we can expect this to happen which means customers with a variable rate may want to seek expert mortgage advice and then start shopping around.
Customers will need to demonstrate their ability to afford a new mortgage when switching providers and the new criteria will often prove challenging against the backdrop of such high inflation and cost of living.
Many customers will find themselves in a SVR trap which sees them paying high Standard Variable Rates, struggling to keep up with payments but unable to switch mortgage.
Tracker mortgages are ideal when interest rates are low or falling and the opposite is happening right now. The European Central Bank interest rate is currently 3.5 % and forecasts indicate that this could increase more over the coming year. Tracker mortgages have had it good for more than ten years with the base rate languishing close to 0 % but these mortgage customers are now feeling the pain of ECB rate hikes and having to pay more each month.
Should You Switch to a Different
Mortgage Provider/Product?
Fixed rate mortgages are protected and there will be no immediate impact from any rise or fall of the ECB interest rate. However, variable rates can change at the lenders discretion and given the current economic climate, we can expect this to happen which means customers with a variable rate may want to seek expert mortgage advice and then start shopping around.
Customers will need to demonstrate their ability to afford a new mortgage when switching providers and the new criteria will often prove challenging against the backdrop of such high inflation and cost of living.
Many customers will find themselves in a SVR trap which sees them paying high Standard Variable Rates, struggling to keep up with payments but unable to switch mortgage.
Tracker mortgages are ideal when interest rates are low or falling and the opposite is happening right now. The European Central Bank interest rate is currently 3.5 % and forecasts indicate that this could increase more over the coming year. Tracker mortgages have had it good for more than ten years with the base rate languishing close to 0 % but these mortgage customers are now feeling the pain of ECB rate hikes and having to pay more each month.
There are two types of
Tracker Mortgages for you
Original Trackers
There are no changes to the original term/balance but, these trackers are exposed to risk via changes to the ECB interest rate. Most of these mortgages will have 10-15 years left on the term but with the rise of the ECB rate some of the best trackers are paying 3.5% and this could increase more. Now is a good time to consider looking at a fixed rate elsewhere for the remainder of the term to provide certainty on cost.
Ported Trackers
These customers moved home and were able to port their tracker mortgage from their previous property as part of the new financing. Ported Trackers typically had a margin of 1 % added to the rate, which means they may soon be paying 4.5 % due to the current ECB interest rate. These mortgages remain exposed to risk in the form of future increases in the ECB rate.
For both trackers, proper analysis is needed to ensure cashflow is adequate and the right alternatives are being considered for the remainder of the term.
Final Thoughts,
Tracker mortgages are feeling the impact of ECB interest rates
while variable rates are lagging behind and fixed rate mortgages are protected. There is likely a fear of future rate hikes and many mortgage customers will benefit from shopping around for a lower rate and locking it in to avoid being hit by any future increases. Either way, after more than ten years of cheap money and low rates, the financial backdrop has changed and it’s important for mortgage customer to seek expert analysis and advice around the best options available.
There are two types of
Tracker Mortgages
Original Trackers
There are no changes to the original term/balance but, these trackers are exposed to risk via changes to the ECB interest rate. Most of these mortgages will have 10-15 years left on the term but with the rise of the ECB rate some of the best trackers are paying 3.5% and this could increase more. Now is a good time to consider looking at a fixed rate elsewhere for the remainder of the term to provide certainty on cost.
Ported Trackers
These customers moved home and were able to port their tracker mortgage from their previous property as part of the new financing. Ported Trackers typically had a margin of 1 % added to the rate, which means they may soon be paying 4.5 % due to the current ECB interest rate. These mortgages remain exposed to risk in the form of future increases in the ECB rate.
For both trackers, proper analysis is needed to ensure cashflow is adequate and the right alternatives are being considered for the remainder of the term.
Final Thoughts,
Tracker mortgages are feeling the impact of ECB interest rates
while variable rates are lagging behind and fixed rate mortgages are protected. There is likely a fear of future rate hikes and many mortgage customers will benefit from shopping around for a lower rate and locking it in to avoid being hit by any future increases. Either way, after more than ten years of cheap money and low rates, the financial backdrop has changed and it’s important for mortgage customer to seek expert analysis and advice around the best options available.
HAVE QUESTIONS
Read our FAQ
You're called Switcheroo.ie but do you help First Time Buyers and Home movers?
Yes, we absolutely do. As long as you are looking to buy a residential property we stand ready to help. We like the name Switcheroo as you are switching home if you are a mover and even if you are a buyer you are switching from tenant to homeowner!!!
What’s the best mortgage I can get?
That’s a question we hear a lot but there is no simple answer to this. There are a number of factors to this which both you and we need to consider when you are thinking of getting a mortgage.
Mortgages come with different terms and banks use different criteria to establish who they lend to, how much and at what rate. Don’t stress too much! You can find out pretty quickly to see if it’s worth your while. From there we will guide you through the process and make sure you get the right mortgage for you and make the process as simple as possible.
If I am a switcher how much can I save?
The Central Bank of Ireland published research that showed that many existing mortgage holders can save over €10,000 euros by switching their mortgage. It will depend on your specific circumstances but just 20 seconds on our calculator will show you what its worth for you to switcheroo.
What documents will you need from me?
Initially, none. The first step is for you to take our Financial Health Check in your secure customer portal. This will help us understand your circumstances and see if you are mortgage fit but we don’t need documentation at that stage. Only later when we move on to preparing your submission to a lender, will we need to make sure that your information is accurate, and we’ll need documentation from you then. Those include proof of your identity, income, utility bills with proof of address, as well as things like visa status where it applies. We’ll always make it clear exactly what we need and why.
Do you perform credit checks?
Our job is to make sure that you have the best possible chance of being accepted. So, we perform our own affordability check before sending anything to a lender. This leaves no footprint on your credit history.
I want to switcheroo, what’s next?
On our website there are calculators that will help you figure out what you can save or what your mortgage would cost. From there you’ll need to register into your customer portal so we can perform a Financial Health Check on you to assess what you can afford.
If all is well, we will then ask for more details on your current circumstances and the specifics of the house you want to mortgage.
Usually, this shouldn’t take more than 60 minutes, and you’ll be one step closer to a mortgage. At this point, you can have a phone call with one of our mortgage experts. They will answer any questions you have and tell you exactly what documents you’re going to need. From there, the expert team will guide you through the application process and keep you updated on progress. You can check progress online and we will keep you updated along the way.
What does Switcheroo.ie do with my data?
It’s all explained in our privacy policy, but basically: we won’t spam you and we won’t pass on your data to other companies so that they can spam you. We hate that.
How does Switcheroo.ie make money?
Yep, we don’t charge any commission. If you get a mortgage using Switcheroo.ie, the lender you use pays us a commission. Some intermediaries charge you an additional commission but not us, we are free forever. These commission never affect our advice. Our reputation and livelihood depend on us always giving our customers the best possible advice. The important bit is we’ll never charge you a penny.
HAVE QUESTIONS
Read our FAQ
You're called Switcheroo.ie but do you help First Time Buyers and Home movers?
Yes, we absolutely do. As long as you are looking to buy a residential property we stand ready to help. We like the name Switcheroo as you are switching home if you are a mover and even if you are a buyer you are switching from tenant to homeowner!!!
What’s the best mortgage I can get?
That’s a question we hear a lot but there is no simple answer to this. There are a number of factors to this which both you and we need to consider when you are thinking of getting a mortgage.
Mortgages come with different terms and banks use different criteria to establish who they lend to, how much and at what rate. Don’t stress too much! You can find out pretty quickly to see if it’s worth your while. From there we will guide you through the process and make sure you get the right mortgage for you and make the process as simple as possible.
If I am a switcher how much can I save?
The Central Bank of Ireland published research that showed that many existing mortgage holders can save over €10,000 euros by switching their mortgage. It will depend on your specific circumstances but just 20 seconds on our calculator will show you what its worth for you to switcheroo.
What documents will you need from me?
Initially, none. The first step is for you to take our Financial Health Check in your secure customer portal. This will help us understand your circumstances and see if you are mortgage fit but we don’t need documentation at that stage. Only later when we move on to preparing your submission to a lender, will we need to make sure that your information is accurate, and we’ll need documentation from you then. Those include proof of your identity, income, utility bills with proof of address, as well as things like visa status where it applies. We’ll always make it clear exactly what we need and why.
Do you perform credit checks?
Our job is to make sure that you have the best possible chance of being accepted. So, we perform our own affordability check before sending anything to a lender. This leaves no footprint on your credit history.
I want to switcheroo, what’s next?
On our website there are calculators that will help you figure out what you can save or what your mortgage would cost. From there you’ll need to register into your customer portal so we can perform a Financial Health Check on you to assess what you can afford.
If all is well, we will then ask for more details on your current circumstances and the specifics of the house you want to mortgage.
Usually, this shouldn’t take more than 60 minutes, and you’ll be one step closer to a mortgage. At this point, you can have a phone call with one of our mortgage experts. They will answer any questions you have and tell you exactly what documents you’re going to need. From there, the expert team will guide you through the application process and keep you updated on progress. You can check progress online and we will keep you updated along the way.
What does Switcheroo.ie do with my data?
It’s all explained in our privacy policy, but basically: we won’t spam you and we won’t pass on your data to other companies so that they can spam you. We hate that.
How does Switcheroo.ie make money?
Yep, we don’t charge any commission. If you get a mortgage using Switcheroo.ie, the lender you use pays us a commission. Some intermediaries charge you an additional commission but not us, we are free forever. These commission never affect our advice. Our reputation and livelihood depend on us always giving our customers the best possible advice. The important bit is we’ll never charge you a penny.
THE SWITCHEROO.IE DIGITAL MORTGAGE PLATFORM
We focus on great customer experience to
support you through your application
Don’t take our word for it, read what our customers think of us
THE SWITCHEROO.IE DIGITAL MORTGAGE PLATFORM
We focus on great customer experience to
support you through your application
Don’t take our word for it, read what our customers think of us
THE SWITCHEROO.IE DIGITAL MORTGAGE PLATFORM
We focus on great customer experience to support you through your application
Don’t take our word for it, read what our customers think of us
Really happy with the advice and service provided by Switcheroo!! I was looking to switch to a better rate which they helped me with and having gone through this I will save thousands off the cost of my mortgage, and there are no charges for Switcheroo’s service. Definitely would recommend them and will come back to them when my fixed term ends.
Jairo
Switcher – CORK
Switcheroo people helped us through the process of the purchase of our new home, they have been extremely professional and very helping throughout all the phases, and even when the timeframe was tight for use they have been able to put us through the final stages. We couldn’t recommend anything better than their service, and if we ever need another mortgage we will know where to reach first.
Connie Robertson
Switcher – Galway
We would highly recommend working with this team! The online portal made everything really straightforward, and, in the end, we knocked 6 years off the term of our mortgage thanks to the great rate they secured for us
Ciaran and Denise
Switchers – Dublin
Switching our mortgage with Dylan as our agent has saved us thousands of euros. Dylan’s attention to detail, prompt replies, regular contact and friendly professionalism enabled us to negotiate our way through the process.
Kathleen
Switcher – Wexford
Very happy with our switching process with Alison from Switcheroo, everything carried out in a quick efficient manner. Even when additional information was required everything was handled very smoothly. Would highly recommend to anyone considering switching
Janice
Switcher – kildare
We switched our mortgage with Alison who helped us through the process step by step very efficiently. They have been very helpful, efficient and are excellent at their work. We saved thousands and I would recommend their services to anyone.
Niall
Switcher – Wicklow
Alison and the Switcheroo team were a great help in assisting us process our mortgage. Instead of having to deal with different customer service officials within the bank we had one point of contact in Switcheroo who kept us updated and kept the process moving.
Susan
First Time Buyer – Dublin
Switcheroo and especially Alison made the whole process as painless as possible. Her diligence and help in explaining and guiding us through the process was invaluable. I would have no hesitation in recommending Switcheroo
Gary and MJ
Switchers – Dublin
Alison and her team made a very daunting task of switching mortgage into something stress free. She supported us entirely throughout the whole process, and her advice was clear, concise and professional. We would have no issue recommending Alison and her team.
Andrea and Ian
Switchers – Meath
As first time home buyers, we found the online process of securing a mortgage very straightforward. It was easy to upload the documents and they responded to any queries we had immediately. We would definitely recommend them and will be using them again when the time comes to switch after the fixed rate expires.
Michael and Kate
First Time Buyers – Meath
We would highly recommend using the Switcheroo Team! The online portal made everything really transparent and straightforward. The team in Switcheroo successfully helped us get credit approval after we were turned down by another bank due to a minor credit issue. Luke and Dylan were so helpful and communication was brilliant.
Cannot thank the team in Switcheroo enough. We are now owners of our dream home.
Karen and Shane
Movers – Dublin
Switcheroo helps us switch our mortgage to a cheaper rate. I have to say that both Luke and Dylan were brilliant, they were the best that I have worked with in any financial institution! They were so prompt and pro active with any query I had and Dylan’s help over the last 2 weeks to hit our target date of today was exceptional. I got several updates per day and even when I called him on his day off, I got a text back within minutes. I will definitely be recommending to my family, friends and work colleagues to look at switching their mortgage with this team
Mark
Switchers – Galway
Really happy with the advice and service provided by Switcheroo!! I was looking to switch to a better rate which they helped me with and having gone through this I will save thousands off the cost of my mortgage, and there are no charges for Switcheroo’s service. Definitely would recommend them and will come back to them when my fixed term ends.
Jairo
Switcher – CORK
Switcheroo people helped us through the process of the purchase of our new home, they have been extremely professional and very helping throughout all the phases, and even when the timeframe was tight for use they have been able to put us through the final stages. We couldn’t recommend anything better than their service, and if we ever need another mortgage we will know where to reach first.
Connie Robertson
Switcher – Galway
We would highly recommend working with this team! The online portal made everything really straightforward, and, in the end, we knocked 6 years off the term of our mortgage thanks to the great rate they secured for us
Ciaran and Denise
Switchers – Dublin
Switching our mortgage with Dylan as our agent has saved us thousands of euros. Dylan’s attention to detail, prompt replies, regular contact and friendly professionalism enabled us to negotiate our way through the process.
Kathleen
Switcher – Wexford
Very happy with our switching process with Alison from Switcheroo, everything carried out in a quick efficient manner. Even when additional information was required everything was handled very smoothly. Would highly recommend to anyone considering switching
Janice
Switcher – kildare
We switched our mortgage with Alison who helped us through the process step by step very efficiently. They have been very helpful, efficient and are excellent at their work. We saved thousands and I would recommend their services to anyone.
Niall
Switcher – Wicklow
Alison and the Switcheroo team were a great help in assisting us process our mortgage. Instead of having to deal with different customer service officials within the bank we had one point of contact in Switcheroo who kept us updated and kept the process moving.
Susan
First Time Buyer – Dublin
Switcheroo and especially Alison made the whole process as painless as possible. Her diligence and help in explaining and guiding us through the process was invaluable. I would have no hesitation in recommending Switcheroo
Gary and MJ
Switchers – Dublin
Alison and her team made a very daunting task of switching mortgage into something stress free. She supported us entirely throughout the whole process, and her advice was clear, concise and professional. We would have no issue recommending Alison and her team.
Andrea and Ian
Switchers – Meath
As first time home buyers, we found the online process of securing a mortgage very straightforward. It was easy to upload the documents and they responded to any queries we had immediately. We would definitely recommend them and will be using them again when the time comes to switch after the fixed rate expires.
Michael and Kate
First Time Buyers – Meath
We would highly recommend using the Switcheroo Team! The online portal made everything really transparent and straightforward. The team in Switcheroo successfully helped us get credit approval after we were turned down by another bank due to a minor credit issue. Luke and Dylan were so helpful and communication was brilliant.
Cannot thank the team in Switcheroo enough. We are now owners of our dream home.
Karen and Shane
Movers – Dublin
Switcheroo helps us switch our mortgage to a cheaper rate. I have to say that both Luke and Dylan were brilliant, they were the best that I have worked with in any financial institution! They were so prompt and pro active with any query I had and Dylan’s help over the last 2 weeks to hit our target date of today was exceptional. I got several updates per day and even when I called him on his day off, I got a text back within minutes. I will definitely be recommending to my family, friends and work colleagues to look at switching their mortgage with this team
Mark
Switchers – Galway
