Banks may be forced to help mortgage holders switch lender
THE Central Bank is proposing new rules to force banks to make it easier for their mortgage customers to move their loan to another lender.
Banks would have to help consumer compare existing mortgage rates to other options, provide standard switching information and facilitate any switch in a set timeframe, under the proposals.
Previous research has found that up to 100,000 mortgage holders could save thousands of euro by moving their mortgage to a different bank.
Some 300,000 homeowners are on variable rates that are among the highest in the Eurozone.
A family on a €300,000 mortgage could save up to €50,000 over the life of the loan by moving from a high variable rate to a lower one.
Some banks are changing up to 4.5pc on variable rates, with others offering fixed rates of 2.6pc.
The difference in repayments between these two rates on a €300,000 mortgage works out at €300 a month.
Under the proposals, the banks will also have to make it clear to those considering switching what impact incentives like cash-back offers will have on them.
Cash-back offers where heavily criticised in a recent report by the Competition and Consumer Protection Commission.
It said that although the deals could be seen as competitive behaviour by lenders, the effect can be bad for customers.
“It could be argued they represent a sophisticated attempt to manipulate consumer behaviour,” it concluded.
Now the Central Bank said there was a need for greater transparency for consumers to allow them to identify savings from switching.
It is proposing the changes it agrees to be put on a statutory footing by setting them out in a mortgage switching code.