Mortgage top-ups for home improvements in Ireland have reached their highest level in 16 years as more homeowners choose to renovate rather than move, according to mortgage switching service doddl.ie.
The company said rising borrowing for extensions, renovations and other home improvements is being driven partly by a shortage of suitable properties, which is encouraging households to remain in their existing homes.
Its latest quarterly Mortgage Switching Index, produced with the Irish Independent, shows that the value of mortgage switching has increased by almost 25 percent year on year. It has reached its highest level since records began in 2003.
The average mortgage being switched rose to €309,666 in the second quarter, highlighting the increasing value of loans being moved between lenders.
Doddl.ie is warning homeowners against automatically obtaining additional borrowing from their existing bank without first checking rates across the wider mortgage market.
The switching service said arranging a mortgage top-up can require much of the same paperwork as securing a completely new mortgage. Applicants may still need to provide salary certificates, property valuations and other documents requested by lenders.
The company said the difference between the highest and lowest mortgage rates available could exceed three percentage points. For homeowners planning to borrow additional money, remaining with their existing lender could therefore result in significant additional interest costs.
On a mortgage balance of €358,212, the difference between the highest and lowest rates could amount to about €642 a month, or approximately €7,706 a year.
Martina Hennessy, chief executive of doddl.ie, said homeowners frequently focus on securing the amount they need for renovations without considering the total cost of financing the project.
“Mortgage holders are making a mistake by sticking with their current lender to fund home renovations before researching the market,” Hennessy said.
She said homeowners looking to borrow €80,000 for an extension or renovation should also consider whether moving their entire mortgage to another lender could produce a lower overall cost.
Many borrowers regard a mortgage top-up as an administrative process, she said, rather than an opportunity to review the interest rate on their existing loan.
The company said homeowners can potentially reduce interest costs by comparing the full range of mortgage products before deciding how to finance improvements.
The rise in top-up borrowing comes as Ireland’s housing shortage continues to influence household decisions. With fewer suitable homes available, some owners are choosing to improve their current properties rather than enter the housing market.
Doddl.ie said homeowners who decide to borrow more should consider the wider cost of the mortgage rather than focusing only on the amount they can obtain.
Switching a mortgage does not involve buying another property. Instead, the existing home loan is transferred from one lender to another, potentially allowing borrowers to secure a lower interest rate and reduce their monthly repayments.
The latest figures indicate that the growing demand for home improvements could provide an opportunity for mortgage holders to reassess their existing loans while financing work on their properties.
