'It's up to consumers' - Five lenders now offer Irish mortgage holders cash for switching

Five lenders are now offering cash incentives and easy switching packages to attract Irish consumers as the gap between the lowest and highest mortgage rates on the market hits a record figure of 3.3%. 

According to mortgage switching index Doddl, householders may be paying a record average of up to €7,292 in extra repayments per year by not switching lenders. 

This compares to €3,587 nine months ago as rising funding costs filter down through the pillar banks and non-bank lenders. 

Mortgage holders are reportedly being offered €2,000 to switch their mortgage to AIB, while MoCo is offering €1,500 to all customers who switch. 

Bank of Ireland and EBS are both offering 2% cashback plus 1% in five years (1% back for BOI account holders only), while PTSB is offering 2% monthly for Explore account holders who pay their mortgage by direct debit. 

Reportedly just 1% of residential home loan mortgages switched in 2023 despite the massive financial gains for doing so.

In Q4 of last year (2023), 8% of all mortgage drawdowns were related to switching, whereas the UK averages over four times that rate at 36%. 

The perceived barriers to switching mortgage have reduced with five lenders now offering switcher incentive packages and reduced document requirements for switcher applicants, according to the Managing Director of doddl.ie, Martina Hennessy. 

She said, "There are now five mortgage lenders in the Irish market who pay cashback to mortgage switchers of up to 2% of the mortgage at time of switching – including new entrant MoCo. 

"Those lenders with the most competitive rates have copper-fastened their offering with a switcher package which covers any switching costs.

"Mortgage switching is hugely important as it creates discipline in the market and promotes competition which leads to lower rates." 

Even the lowest rates on the market are available with a switcher package of €2,000, which means that a mortgage holder can switch and benefit from this cash amount. 

The market is pricing in rate cuts of up to 1.5% by the ECB in 2024 and the first of these cuts could start to flow through to tracker mortgage holders over the coming months. 

However, mortgage holders on fixed and variable products might find that Irish banks hold their rates tight. 

Hennessy said, "For the vast majority of Irish mortgage holders who do not have a tracker rate, the ECB rate cuts do not mean that the Irish banks will follow. 

"There are several factors which will impact downward rate movement in the Irish market, including the funding mix of Irish lenders but lack of competition is also a major factor. 

"Our pillar banks may have been slower to increase rates following ECB rate increases, but when rates and funding costs start to drop, they may also be slow to pass on any decreases." 

She continued: "There may have been a time when political pressure, due to State shareholding in the pillar banks had a part to play in keeping rates somewhat in check, however now it's up to consumers to actively switch if their current lender is uncompetitive. 

 "Mortgage holders need to question their lenders with the attitude that if you don’t offer me a better rate, then there are better options that I can look at.

"It is now more important than ever that existing mortgage holders review their mortgage rate not just accept the first rate offered to them at the end of a fixed period."