Irish Homeowners Missing Out On Big Mortgage Savings
Recent figures released regarding the state of the Irish mortgage market have revealed that many homeowners are missing out on the opportunity to make big savings on their monthly mortgage payment, partly because they are reluctant to switch to a new provider and partly due to problems within the mortgage industry itself.
The figures revealed that so far in 2015, a mere 712 mortgage customers have been able to switch their mortgage to a new provider. While this may partly be down to a lack of desire or understanding from homeowners themselves, the Central Bank and retail lenders have also themselves drawn criticism from personal finance experts and finance spokespeople. For example, Fianna Fáil Finance Spokesperson Michael McGrath recently commented:
“It appears the banks are quite satisfied to maintain the status quo in the Irish mortgage market where product innovation is frowned upon” he continued “To minimise the potential barriers to mortgage switching there is now a clear case for the Central Bank to introduce a statutory code of conduct on the subject.”
This frustration with the Irish mortgage industry comes despite a report on mortgage switching from the Central Bank earlier in the year which revealed that over 100,000 homeowners with a residential mortgage could be saving money on their monthly repayments if they were to change provider. The report also showed that around 27,000 of them could save over €10,000 over the lifetime of their mortgage loan, just by finding a better mortgage deal and then switching providers. Furthermore, around 26,000 people could save around €1,000 a year on their repayments if they were to switch their mortgage to a new provider.
After the financial crisis of 2007-08, many Irish banks stopped offering mortgage switching. In 2014 leading lender KCB became the first lender in 5 years to allow people whose home was worth more than their mortgage to switch their mortgage to them, ruling out those in negative equity. KCB even offered borrowers an incentive by offering to pay up to €1,000 towards the legal costs when switching.
Proposed Changes Dismissed as “Complete Nonsense”
Further rule changes proposed by the Central Bank in recent weeks designed to better inform homeowners about any hikes to the variable rate payable on their mortgages were also dismissed as “complete nonsense” by Brendan Burgess of the Fair Mortgage Rates Campaign.
Under the proposed changes, mortgage lenders would need to give borrowers more than 30 days’ notice before hiking rates. Banks could also be required to tell mortgage holders about any cheaper options they have available, such as lower fixed rate deals.
When commenting on the changes Ben Burgess said “They only serve to underline the Central Bank’s complete lack of understanding of the reality of the mortgage market in Ireland.” he continued “The proposals will be of no help whatsoever to mortgage holders who are paying twice the rate being charged in other eurozone countries.”
Although mortgage arrears continue to fall in Ireland, variable interest rates charged by banks in the country are still among some of the highest in the eurozone.
Article by Adam Buller at Loans Ireland – Ireland’s only independent dedicated loan comparison website.
Main image by Eduardo Fonseca Arraes @ Flickr.Mortgages