Mass mortgage switching will 'terrorise' banks
A plan to get thousands of people to switch their mortgages to another lender is set to "terrorise" banks and force them to cut their rates.
The Irish Mortgage Holders Organisation (IMHO) will do the switching for people who are being overcharged for their variable rates, in a move that would overcome consumer inertia, the Irish Independent has learned.
Finance Minister Michael Noonan has received a report from the Central Bank and is set to call in all the main lenders next week to pressurise them to reduce rates. He said he would like to see a series of phased reductions in variable rates.
Meanwhile, the IMHO is aiming to get up to 25,000 people to act - by teaming up with the One Big Switch Campaign, a group that has already done deals with electricity providers and health insurers for those who sign up with it.
David Hall of the IMHO said banks would dread such a mass switching campaign.
"Banks are scared stiff at the prospect of losing good-value dream clients like teachers and nurses, who paid their mortgages over the last few years, are not in negative equity and have no arrears. The idea of losing those sorts of mortgage customers from their books will terrorise banks," Mr Hall said.
The plan is to get at least 10,000 people who owe less than their properties are worth to commit to moving their mortgage to a lender with a lower rate.
Switching to the best-value mortgage could see a family with a €250,000 home-loan saving around €1,500 a year. This is because there is a one percentage point gap between the highest and lowest variable rates in the market. One Big Switch would negotiate a deal with one lender for a cut-price deal, and the Irish Mortgage Holders Organisation would use its financial experts to carry out the switching.
The Central Bank is understood to be demanding that organisations encouraging people to switch should be licensed as mortgage intermediaries. This could delay the launch of the campaign for a few weeks. About 150,000 of those with a variable rate are in positive equity and could therefore switch.
Last week, the SVR Mortgage Campaign group, which is led by Brendan Burgess of Askaboutmoney.com, said it wanted thousands of people to switch to force down variable rates.
If enough people did this, banks would be left with no option but to implement sharp reductions in sky-high variable rates, Mr Burgess said. He said he was also seeking legislation to enable the State to order a cut in mortgage rates.
Meanwhile, MEP Brian Hayes said the Central Bank should support credit union plans to provide a range of well secured mortgage products.
"The Government also needs to consider how it might introduce much-needed competition into the mortgage market," he said.