Where is the mortgage market heading in Ireland?
Financial Planning

Where is the mortgage market heading in Ireland?

Nick Charalambous
Nick Charalambous31st May 2021 • 8 min read

Should I fix or not? The Sunday Times Article

Mortgage Market In Ireland

Humans typically suffer from something called “status quo bias”. This means we love routine and are often opposed to change.  The problem with Mortgages is this doesn’t work very well unless of course you happen to be lucky enough to have one of the older style “tracker rate” mortgages. Inertia can costs tens of thousands of euro to the average couple over the lifetime of their mortgage. 

Ireland’s Mortgage Market Crisis

A big reason for this is that Ireland has one of the highest interest rates in all of Europe, running at an average of 2.79% per annum. More than double that compared to the main countries of France and Germany, which are at around 1.15%.  Denmark’s is currently at an astonishingly zero percent.  To put this in perspective, if you have a Mortgage of €300,000 at an interest rate of 3% with 25 years remaining you will be paying the bank €126,790 interest on top of the €300,000 loan. The monthly repayments would be around €1,422. By contrast if your rate was 2.1%, your interest cost would fall to €85,866 with monthly repayments of around €1,286. This is a whopping €136 per month less or 10%.  This is enough to fund about one and a half children through all of their college education needs.

What are the best mortgages available in Ireland?

Two institutions at present, namely Avant and AIB, offer the lower 2.1% rate albeit subject to certain loan to value ratios (LTV).  The LTV is the amount of the loan as a percentage of the value of the property. To avail of these rates, the LTV it has to be between 50%-80% depending on the lenders criteria. Avant really opened the market but are a little stringent when lending money.  For example you have to live near a bigger city and in the same employment for more than 2 years.  For many first time buyers they won’t be able typically to get these rates but 2.25% per annum with cash back is becoming more and more common. 

Cashback

A lot of people ask whether cash bank is a good deal? and really the answer is that it is if the rate of interest is not jeopardised.  For example, if you are say offered 3% cash back , €6,000 on a €200,000 mortgage but at a rate of 2.5% versus a straight 2.25%, then you need to see the calculations to the difference it makes over the lifetime of the mortgage. Generally the lower rate will win out.  Some people chase lower rates with cash back deals and I came across a client recently who was in his third mortgage in 5 years having got 2 cash back deals in that time.  It is possible but takes a bit of work and effort and the reason why more don’t do this is due to the bias mentioned earlier and that getting a mortgage can be stressful.

Do you know your Mortgage rate?

An ongoing issue lot of people have is they don’t know what their mortgage rate is. Therefore, they don’t really have a starting point to what they should be getting. Let alone where the mortgage market is heading. The truth is that nobody can be certain exactly whether rates are going to fall or rise. At some point both will occur. As well as this the environment is so changeable. 

Up until the pandemic I recommended to my clients to stay on a low variable rate or short-term fixed rate. This was because rates looked likely to fall due to pressure of competition from the likes of Avant and from banks across the Irish Sea.  It seems however now the reverse is likely to occur. The recent announcements of KBC and Ulster Bank to leave the mortgage market and the fear of increasing interest rates are likely to cause upward pressure.

Another thing to bear in mind is that owner occupiers, whether they are first time buyers or not are in a much better positon than those renting properties.  Interest rates for those renting are more in the region of 3.5%-4.5% per annum. 

You should be proactive in this space. Whether you are looking to buy a property or looking to reduce the cost of your current one.  Sometimes braking a fixed rate mortgage can be financially beneficial. But again information is power and finding out the breakage cost from your bank is the starting point.  If you’re on a rate of 2.25% p.a. then is it unlikely to be worthwhile. However, anything over 3% then it really is something to seriously consider.

Should I use a mortgage broker?

Whether or not you should use a mortgage broker or go it yourself is some part down to the complexity of what you are doing and how informed you are.  The more complex, say buying and selling then it might be worthwhile but always check fees before embarking on this.  The key thing is to make sure you have the relevant information. Know what rate you are on, what rate you could be on and bridge the gap.  Sometimes time is a healer, insofar of coming of a fixed rate and making a change then but if it was me, I would see if a quality for a 2.1% mortgage and work backwards from there.”

Mortgage Protection

We would love to help you get mortgage protection. We are an independent brokerage and can shop the market to get you the cheapest premiums possible. Click here for more details on mortgage protection. You can also check our Instagram page for all the latest news and updates. Click here

Nick Charalambous is an independent Qualified Advisor with Alpha Wealth.

Nick Charalambous

Nick Charalambous

31st May 2021

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Planning for Separation or Divorce: Key Financial Considerations
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Planning for Separation or Divorce: Key Financial Considerations

Planning for Separation or Divorce: Key Financial Considerations 

As a financial adviser, and someone who has experienced separation and divorce personally, I understand that it can be one of the most difficult periods in a person’s life. 

Alongside the emotional and family considerations, separation or divorce also involves important financial decisions. From property and pensions to maintenance and tax, there is a lot to consider when moving from one household to two. 

Getting organised financially from the outset can help reduce some of the stress and uncertainty that comes with such a significant life change. 

Start by understanding your financial position 

The first step is to establish a clear picture of the finances of both parties. 

This includes: 

  • Income and regular expenditure 
  • Property and mortgages 
  • Savings and investments 
  • Pensions 
  • Loans and other debts 

This information is generally captured in an Affidavit of Means, which provides an overview of your financial circumstances. 

Having the full picture from the beginning can make discussions with your solicitor, financial adviser and, where appropriate, a mediator much more productive. 

How are assets divided? 

There is no simple formula for dividing assets following separation or divorce. Every family’s circumstances are different, and a number of factors may need to be considered, including: 

 
  • The length of the marriage 
  • Each person’s financial position 
  • Assets held before the marriage 
  • Each person’s income and earning capacity 
  • Existing debts and financial commitments 
  • The needs of any dependent children 

 What happens to the family home? 

The family home is often one of the biggest financial and emotional considerations. 

Depending on the circumstances, one person may remain in the property, one party may buy out the other’s interest, or the property may ultimately be sold. 

It is important not to look at the house in isolation. Someone may retain the family home but have limited savings, pension provision or disposable income. 

Looking at the overall financial position helps to understand what a proposed settlement could mean for both parties over the longer term. 

Don’t overlook pensions 

Pensions can be one of the most significant assets involved in a separation, particularly after a long marriage. However, they can easily be overlooked because they are less tangible than property or cash. 

A Pension Adjustment Order may be used to allocate pension benefits between spouses. This is an area where professional legal and financial advice is particularly important. 

What about maintenance and children? 

Where children are involved, their financial needs should remain central to discussions. 

There is no standard amount of child maintenance that applies to every family. The amount will depend on the individual circumstances, including the parents’ financial position, income and the needs of the children. 

It is also important to consider costs beyond monthly maintenance, such as: 

  • Childcare 
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  • Medical expenses 
  • Extracurricular activities 

Spousal maintenance may also arise depending on the circumstances of the marriage and the financial position of each party. 

Don’t overlook tax 

Separation can change an individual’s tax position, including the tax credits available to them. 

For example, depending on the circumstances, a parent may qualify for the Single Person Child Carer Credit, which is worth €1,900 in 2026. 

There can also be different tax treatment for child and spousal maintenance. Certain transfers of assets between spouses or former spouses following separation or divorce may qualify for tax exemptions. 

It is therefore important to seek appropriate legal and tax advice before transferring property, investments or other significant assets. 

Reducing conflict and planning for the future 

Getting the right advice early can make a significant difference. 

A solicitor can advise on the legal aspects, while a financial adviser can help both parties understand the financial implications of different options. Mediation can also be helpful where both parties are willing to work towards an agreement. 

One of the best places to start is by getting organised. Gather your: 

  • Bank statements 
  • Mortgage details 
  • Pension statements 
  • Investment valuations 
  • Insurance policies 
  • Details of debts 
  • Household expenditure 

Finally, don’t just focus on getting through the separation. Moving from one household to two can significantly change the cost of living for both parties. 

Reviewing your budget, savings, pensions, insurance and longer-term financial goals can help you plan for what comes next. 

Knowledge gives you options. Understanding your financial position early can help you make informed decisions and plan for a more secure financial future beyond the separation. 

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1. Review Your Finances Regularly

Think of your financial plan as a guide to staying in control of your money. Start by tracking all your income and expenses for one month, groceries, transport, bills, and even forgotten subscriptions. Once you know where your money is going, you’ll see opportunities to cut back, like eating out less or cancelling unused services.

To make this process easier, use Alpha Wealth’s handy Budget Calculator to get a clear picture of your financial situation.

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Overspending during Christmas is common, especially on credit cards with high-interest rates. Prioritise paying off this debt as quickly as possible before you start saving. Reducing debt gives you more financial freedom and lowers the stress of repayment in 2025.

Pro Tip: Start by tackling the highest-interest debts first, these are costing you the most.

3. Segregate Your Savings

Divide your savings into three pots to keep your financial goals clear:

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  • Medium-term (3-10 years): For goals like education or major life milestones.
  • Long-term (retirement): Invest in tax-efficient options like pensions to maximise growth.

 

By separating your funds, you can use the right financial tools for each timeline, ensuring your money works harder for you.

4. Maximise Your Savings Returns

Don’t let your money sit in low-interest accounts. For short-term savings, consider online banks like Raisin or Bunq, which often offer rates above 2%. Lock in fixed-term deposit rates now before they drop further in 2025.

Also, take a moment to review your mortgage rate. You might be able to switch to a lower rate and save significantly on your monthly repayments.

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Take advantage of the tax relief on contributions—up to 40%. If your employer offers a matching scheme, join it to benefit from essentially free money. Boosting your pension now can make a big difference in your retirement years.

6. Practice the Rule of 72

Impulse purchases can derail your budget. Use the “Rule of 72”: wait 72 hours before making any non-essential purchase. This cooling-off period is particularly useful during January sales, helping you avoid unnecessary expenses while still enjoying genuine bargains.

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Log in to Revenue’s myAccount or Revenue Online Service (ROS) to update your details and ensure you’re not leaving money on the table.

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Instead of scrambling for cash when big expenses arise, start saving early. Open a dedicated savings account in January for your 2025 goals, whether it’s a holiday, Christmas, or a major purchase.

For example, saving €167 per month will leave you with €2,000 by summer.

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What Budget 2025 means for you

As the dust settles on Budget 2025, many are wondering how the announced measures will impact their daily lives. With a headline figure of €6.9 billion in new spending, the coalition government is taking steps to address a range of societal needs. Here’s a breakdown of the key takeaways from the budget and how they might affect you.

1. Social Welfare Increases

Those receiving social protection will benefit from a €12 weekly increase in payments. Additionally, double payments in both October and December will provide extra help just when it’s needed most. Families with newborns can look forward to a special €420 ‘baby boost’ payment, while maternity, paternity, and parental benefits will rise by €15 a week. These changes offer real financial support for households facing the rising cost of living.

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Taxpayers will feel some relief with the changes introduced in Budget 2025. The entry point for the higher 40% tax rate is moving up to €44,000, so more of your income will be taxed at the lower 20% rate. This will leave middle-income earners with an extra €100 per month. Combined with a 1% cut in the USC, these changes are designed to ease financial pressures and boost your take-home pay.

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If you smoke or vape, you’ll see price hikes on these products. Cigarettes will increase by €1 per pack, bringing the most popular brand to €18.05. Vapers will also feel the pinch, with the price of a typical vape rising to €9.23 next year. These changes aim to promote health, but they will hit younger consumers’ pockets the hardest.

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Budget 2025 introduces a range of financial supports designed to relieve the pressure on households as they navigate the cost of living challenges. While Budget 2025 brings positive changes that will help ease financial pressures, it’s important to take control of your finances and make the most of these opportunities. Consider speaking with an impartial financial advisor to get your money working harder.

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