Is switching mortgage worth it - €85k left

abbey

Registered User
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55
Hi,


I am contemplating switching my mortgage.

There is €85,000 left on it (12 years) and it's on a variable rate (3.85 %). The LTV is well below 50%, probably about 33%. Financially is it worth my while bothering as switching fees could possibly cost between €1500 - €2000. Would I cover that in interest savings over the remaining term of the mortgage?
Also, would another bank even consider taking it on?

Any advice?


Thanks.
D
 
By my calculations, you would save €3,675 in interest payments if you switched to KBC (assuming the difference in interest rates remains constant over the 12 years). It typically costs around €1,000 to switch and KBC will pay you €2,000 for your troubles.

Obviously if you took the opportunity offered by the lower interest payments to pay off the mortgage more quickly, your savings would be greater again.
 
Hi Sarenco

That is why I asked the question. He is probably with KBC which shows why your calculation is incorrect. KBC does not pass on rate cuts to existing customers. If he is with Ulster Bank his rate will probably come down. So if he switches to KBC he would lose out.

Brendan
 
Fair enough - if abbey is already with KBC then obviously switching to KBC is not going to be an option but I don't think that makes the calculation incorrect.
 
By my calculations, you would save €3,675 in interest payments if you switched to KBC (assuming the difference in interest rates remains constant over the 12 years).

You have been encouraging people to switch to KBC on the assumption that the difference in interest remains the same.

This is a clearly incorrect assumption to make as KBC does not pass on interest rate cuts to their existing customers.

In this particular case, it's even more wrong because it's a relatively small mortgage with only 12 years left, so if he switches to KBC and, after 3 years, the rates are cheaper with other lenders, the costs of switching again will not be justified.

The only lenders to whom abbey should consider switching are AIB and Ulster Bank who pass on rate cuts to existing customers.

Brendan
 
Sorry Brendan but there was no encouragement or recommendation in my post.

The question was asked whether it was worth switching and I simply set out the maths, with the explicit assumption that the spread between the two rates remains constant over the remaining 12 year term. Obviously, I have no idea whether the spread will, in practice, remain constant. Neither do you.

I appreciate that you find it objectionable that KBC does not, in practice, automatically reduce rates for existing customers when they reduce their new customer rates. However, that does not impact the maths. You might argue that KBC's business model makes it less likely that the spread between the rates will remain constant - but that's all you can say.

Currently there is effectively no cost to a customer to switch to KBC (or Ulster Bank, PTSB or BOI) given the incentives on offer so I don't understand your argument in this regard.

FWIW, I think the re-draw facility offered by KBC could be particularly valuable to a borrower on the "home straight" of their mortgage that might be in a position to make material repayments ahead of schedule but that's probably a minor consideration.
 
Thanks for all the comments and info.
Yes, I am currently with KBC. I'm inclined to switch as I kinda agree with Brendan's point of view as outlined (KBC does not pass on interest rate cuts to their existing customers). I mightn't save a huge pile but at least if enough people switch it might make the banks re-consider their policy. Maybe someone else might benfit down the road even if I don't
What is the "re-draw facility" offered by KBC? Useful to know that AIB and Ulster Bank pass on cuts to all borrowers.

A
 
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