Need for lifestyle mortgages
Lenders may have to become much more creative or flexible with their mortgage products if they wants their books to be anywhere near as full as 10 years ago, according to Ken Murray of the Irish Association of Mortgage Experts.
"There is currently a dearth of creative and flexible mortgage products on the market," he said. "Lenders are all competing solely on price."
Feedback from brokers, he says, shows that lenders could gain more customers by creating products that could compete on flexibility or security rather than on minimal price differences.
"We believe that there's an opportunity for a type of 'lifestyle' mortgage product to be introduced, which would be tailored to the changing needs of mortgage holders as they go through life. The pensions industry has promoted a more tailored approach to their products for years - so why not the mortgage industry?"
Mr Murray says, for instance, that many first-time buyer couples on the average industrial wage would gladly opt for the security of knowing their mortgage payments were fixed over terms longer than those currently offered.
"This would protect them from rate fluctuations for a period when they are unlikely to experience a huge growth in disposable income and, therefore, are unlikely to want to trade-up or overpay their mortgage, but also during a time when they may see other expenditures rise, such as costs of raising children etc.
Only Ulster Bank and Bank of Ireland offer fixed rates to first-time buyers of more than five years, but more could be done to make this more attractive, he said. "For example, give clarity to clients that if they wanted to move house during the term of the fixed rate, they could break the rate or move the rate with them to their 'new house' mortgage without penalty, or if a client was able to pay a lump sum off or increase repayments due to a pay rise, that they could facilitate these options as a starting point.
"People could even fix a certain percentage of their mortgage and keep the rest variable so they are covered on both fronts. This is not currently an option for most borrowers," said Mr Murray.