Monday 10 December 2018

Home Economics: Our property finance  expert answers  your questions

Sinead Ryan
Sinead Ryan
Sinead Ryan

Sinead Ryan

Question: We are buying our first home together, although my husband is not a first time buyer. He got stung badly in the financial crisis on his first house and is anxious that we get a 10-year fixed rate mortgage now. He says this is the safest one, with guaranteed repayments. I haven’t heard of anyone we know getting a fixed rate for this long – are they are good idea?

Answer: I can completely understand his concerns. A long-term fixed rate mortgage gives you peace of mind over repayments, so you know exactly how much is going out of your bank account every month and you can then budget around this.

Currently 10-year rates are offered by Bank of Ireland (3.3pc) and KBC (3.2pc) depending on your loan-to-value ratio. It is also true that the European Central Bank has signalled an interest rate increase next year (although probably not until Autumn at least), so there’s a certain logic to locking in now.

All that said, I am not a fan of a 10-year fix. The reason is that life and circumstances can change completely in that time, and banks penalise customers who break fixed rate contracts in many cases, as they are charging for interest foregone. You could come a cropper if you need, or want, to break out of the loan.

You or your husband could, say, lose your job, get a promotion and want to pay more toward your mortgage, split up (perish the thought!), move abroad, receive a gift, win or inheritance you’d like to pay debt down with, or simply outgrow your house and want to trade up. Your mortgage contract will be impacted in all of these scenarios, and you may find yourself being prevented from making any change to it, even when you want to.

Fixing is fine, and even prudent. In fact, more buyers are opting for fixed rate than variable at the moment, and some 29pc of all mortgages are fixed.

So, why not compromise and consider a 3 or 5-year fix instead: KBC and Ulster Bank offer very competitive 3-year rates at 2.6pc and 2.85pc respectively depending on circumstances. Bank of Ireland has a 5-year fix at 3pc.

Question: I have gone sale agreed on a 1940s end-terrace house in Limerick City. It needs work, especially with insulation and windows. I have googled SEAI but am still confused about what exactly can I apply for.

Answer: Congratulations. It’s a great idea to spend a bit of money insulating an old house. You don’t tell me what the BER is, but I’m suspecting it’s in the lower letters!

I contacted the SEAI and they have individual grants across a range of insulation, home heating and Solar PV measures. They range from €400 to €6,000 and typically cover around a third of the total costs, so it’s good value. You can apply for several grants at the same time, and none are means tested.

They added: “Improving your insulation should be your first priority — it ensures you keep all your valuable heat in. We have grants for attic and wall insulation. Once your home is warm and cosy, then think about how you can improve your heating system. There are grants for heat pumps, solar, thermal and heating controls”. 

Start by getting a BER Certificate if you don’t already have one (although it is an order of sale these days that the vendor provides this).

For major renovations to bring it to A-rated, there is a 50pc grant available if everything is done in one go. This is expensive, though, so only helpful if you can afford major work, and also the house would need to be tested for suitability. Have a look again at www.seai.ie/homeenergygrants; you’re looking for the ‘Better Energy Homes’ tab, or call 1850 927000.

The Ryan Review

There are around 730,000 residential mortgages in Ireland. Most borrowers are getting fleeced on their interest rate, so commentators like me, and organisations like the CCPC, are always encouraging people to switch their lender and save money.

Even the lenders want people to switch, some going so far as to pay for valuations, open branches at weekends, cover legal fees and give free insurance.

Yet figures show that just 523 households received approval to switch their mortgage in July. Not all will. And yet that’s an increase of 72pc since last year.

In contrast there were 1,957 new mortgage approvals for first time buyers alone in the same month. These figures are not unusual.

So with all the effort being put into showing people how effective it is to walk with your mortgage, especially with rising house prices improving equity positions (they’re up 10.4pc since last year nationwide), why are they still so reluctant?

“It’s crazy”, says switching website Bonkers.ie. “The level of switching in the Irish mortgage market is still far too small, particularly when you consider the potential savings involved, but the increase is encouraging and is a reflection of growing competition among banks for new business. Rising levels of equity due to the rapid rise in house prices has also helped as previously mortgage holders who were in negative equity would have had few options.”

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