Tens of thousands of mortgage holders stuck on high fixed rates may be able to achieve significant savings by getting out of the fixed rate they are on with little or no penalty under the terms of the Mortgage Credit Directive, according to Fianna Fáil Spokesperson on Finance Michael McGrath.
Deputy McGrath commented, “I know of a number of mortgage holders who have in recent times been able to break out of the fixed rate early with little or no penalty. Mortgage holders who are released from their current high fixed rate may be able to secure savings by fixing again with the same lender at a lower rate, moving to a lower variable rate or by switching to another lender.
“At present, mortgage holders on fixed rates owe over €14 billion to lenders. Some of these may have fixed in recent times at a competitive rate but many others are stuck on high fixed rates of 4% or 5% and they should be seeking to break out of them to get a much better deal.
“The EU Mortgage Credit Directive has changed the way lenders calculate a breakage fee when a mortgage holder wants to exit a fixed rate early, so the days of being hit with a large penalty for coming off a fixed rate early should be over.
“While the provisions of the Directive – which has been transposed into Irish law – are complicated, the net effect is that many mortgage holders can exit their fixed rate without penalty and get a better deal with the same bank or elsewhere. However, there seems to be little awareness of the change in the rules.
“Mortgage holders stuck on high fixed rates should contact their bank and ask if there is a cost to them exiting the fixed rate arrangement early. It seems to me the Central Bank should undertake a campaign to build public awareness that the rules governing breakage fees have now changed and consumers may be able to benefit,” concluded McGrath.