Wednesday 28 September 2016

Forget the Government taking action - switching will send a clear message

Published 02/05/2015 | 02:30

On top of the commercial damage, the planned strikes will also cause needless hardship to the travelling public – the people who pay their wages
On top of the commercial damage, the planned strikes will also cause needless hardship to the travelling public – the people who pay their wages

Forget the Government doing anything about variable rates.

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Forget the Central Bank acting on the issue. Forget the Competition and Consumer Protection Commission, and forget the continued expressions of outrage over the situation issued by all and sundry.

None of it will work.

What will be effective in forcing our obstinate banks to act is if thousands of people get annoyed enough about being fleeced to do something. That something is to move your mortgage.

Around half of the 300,000 homeowners overpaying for their mortgages on variables are in positive equity. This means they owe less than their home is worth. As long as they are not, and have not been, in arrears and have a good credit rating they can switch to get better value.

It is no good giving out about your bank, you have to act. And, boy, do the banks here punish variable-rate customers.

Goodbody Stockbrokers analyst Eamonn Hughes estimated that standard variable rates were on average 3pc above the average cost of funds for banks.

If a couple of thousand people were to start moving to a bank offering a lower rate, lenders would soon act.

Another factor that is likely to put downward pressure on rates is if the Court of Appeal agrees with the High Court that Danske Bank's variable rate should reflect market rates, and as such is too high.

This case could have huge implications for most variable-rate mortgage holders.

But the judgment has been reserved, and we don't know when it will be delivered.

Irrespective of the outcome, people who are in positive equity have it in their own hands to force a reduction in mortgage rates.

Just setting the process in motion may be enough for your bank to offer you a discount.

And don't be tempted to take up the bank's offer of a fixed rate. These are lower than variables at the moment, which is a sure sign that variables are on the way down.

Don't be passive, get active, get mad and get a better deal.

Irish Independent

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