Banks will be forced to help customers to switch mortgage
Banks would have to help their own customers compare mortgage rates with rivals and make it easier to switch under new proposals from the Central Bank.
The rules would force banks to make it easier for their mortgage customers to move their loan to another lender.
Banks would have to help consumers compare existing mortgage rates, provide standard switching information, and facilitate any switch within a set timeframe.
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 charging 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 were heavily criticised in a recent report by the Competition and Consumer Protection Commission.
"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.
Acting deputy governor Bernard Sheridan said changes have already been implemented to force banks to make clear to variable-rate customers what they are being charged, and to outline better value options the bank may have available.
"These measures will require lenders to provide consumers with the necessary information at the right time to consider their options and ensure that the process facilitates consumers who want to switch their mortgage," he said of the proposed changes.
He said research carried out by the Central Bank in 2015 shows that many consumers can make significant savings by switching their mortgage.
A consultation process on the proposed changes has opened for three months, with a closing date of November 1.
Brendan Burgess, of the Fair Mortgage Rates Campaign, was disappointed that the Central Bank is not proposing to ban cash-back deals.
"Lenders are keeping mortgage rates high by competing for new customers with 2pc cash back. The Central Bank seems, at last, to be recognising this.
"The Central Bank should ban cash back so that banks would have to compete on mortgage rates and not on gimmicks," Mr Burgess said.
But he said the Central Bank was not proposing to do anything about what he said was confusion for consumers over cash-back deals.
He also called on the Central Bank to prohibit discrimination between new and existing customers, in line with mortgage legislation that was published by Fianna Fáil.