Mike Soden was on Newstalk on Friday:
media.newstalk.ie/listenback/49/friday/2/ - From 0:48:05 on.
He said a tracker could be worth €1k - €2K a year to someone and the bank could offer to bring the next 10 years savings forward and make a deal with the mortgage holder by lodging €20K in the person’s account if they agree to come off their tracker.
Keeping things simple - if we use Karl Jeacle’s Mortgage Calculator:
A €500K mortgage, starting from Jan 20111, over 30 years @ 2% gives:
- A monthly repayment of €1,848
- An outstanding capital balance after 10 years of €365,320 - so a repayment of €134,680
- A total interest payment after 10 years of €87,088
At the same time someone on a 3% rate would be paying:
- A monthly repayment of €2,108
- An outstanding capital balance after 10 years of €380,099 - so a repayment of €119, 901
- A total interest payment after 10 years of €133,058
So after 10 years they would have paid €45,970 more in interest and have €14,779 less in capital repaid.
More realistically, anyone moving would probably get a 4% rate quoted, meaning:
- A monthly repayment of €2,387
- An outstanding capital balance after 10 years of €393,919 - so a repayment of €106,081
- A total interest payment after 10 years of €180,363
So after 10 years they would have paid €93,275 more in interest and have €28,599 less in capital repaid than @ 2%.
So a difference of €121,874
But what if you wanted to shop around?
Any mortgage provider is going to take the current value of the house - which if we say is 40% less - means €200,000 needs to be financed to allow movement to another provider.
So how much should someone be considering if they were to get an offer from the bank that they could not refuse?