Homeowners missing out on €2,000 mortgage loan bonanza
Homeowners are paying thousands of euro extra for their mortgage each year because they find it too complex and difficult to switch to another lender.
A combination of concern that they will not get a better deal and the complexity of the switching process means most people do not consider it.
However, new research shows savings of €2,000 a year can be achieved by families who manage to get a better variable mortgage rate.
The difficulty in switching has also been highlighted as one of the key reasons why mortgage rates in this country remain so high. The banks would be forced into providing more competition, making deep cuts in variable rates for existing customers, if switcher levels were higher.
Research commissioned by the Competition and Consumer Protection Commission, and seen by the Irish Independent, shows just 2pc of those surveyed had switched their mortgage over the past five years.
And it indicates that just one in seven mortgage holders has ever considered switching, or has actively engaged with the mortgage lender in the past five years.
Many are nervous about switching their mortgage to another lender because they don't believe they will get a better deal.
This is the main reason people fail to switch their mortgage, despite the fact that savings of €2,000 a year can be made by getting a better variable rate.
Small numbers have compared mortgage offers in the market.
Some are on good value tracker mortgages, and it would not make sense for them to switch to a variable.
However, other major reasons cited for not comparing other banks' rates, or switching mortgage provider, are:
- People think there would not be any benefit from moving provider.
- The family already has a good value tracker rate, or is tied into a fixed rate.
- It is difficult to find out which provider is the cheapest.
- They have never really considered it.
The research, which was carried out by Behaviour and Attitudes with 1,001 adults, also found mortgage holders would like a quicker and more efficient switcher process.
This is something the Central Bank has promised to look at, however, it has also admitted it is not in a position to force banks to lower variable rates.
A separate Central Bank study estimates that one in five mortgage holders can save by switching.
An analysis of 500,000 mortgages found that in some cases, switching could produce savings of €10,000 over the lifetime of the loan.
The numbers switching are low compared with the peak of the property market in 2008, but have picked up recently.
Consumer campaigner Brendan Burgess said the mortgage switcher market was starting to take off again.
However, he also outlined some of the impediments families face when it comes to switching for a better deal.
"The data shows that Irish borrowers will go to the trouble of switching mortgages if they can and if there are savings to be made.
"But if they are stuck in negative equity, or if there are no savings to be made, they won't bother," he said.