Central Bank proposes laws to help mortgage switching

Banks may have to inform consumers of other mortgage options that could save them money

The offices of the Central Bank of Ireland, New Wapping Street, North Wall Quay. Photograph: Alan Betson

The offices of the Central Bank of Ireland, New Wapping Street, North Wall Quay. Photograph: Alan Betson

 

The Central Bank has proposed the introduction of statutory requirements to support consumers considering switching their mortgage.

The purpose of any legal guidelines would be to ensure that consumers can switch their mortgages “within a transparent framework” that protects their best interests, the central bank said in a consultation paper issued Tuesday.

New measures from the bank to enhance the framework of protections for mortgage holders could require lenders to inform consumers about other available mortgage options that could save them money.

In addition, banks could be forced to help consumers compare their existing mortgage to other mortgage options.

Research from the Central Bank in 2015 showed that a significant number of consumers could make large savings by switching their mortgage. At the time the bank estimated that 21 per cent of consumers could save on their mortgage by switching.

Strong framework

It said that in the first 12 months after switching, approximately 16,000 mortgages will save in excess of €1,000.

“The Central Bank has put in place a strong framework to protect consumers both when taking out a mortgage and throughout the term of the mortgage,” said Bernard Sheridan, the bank’s acting deputy governor.

“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 added.

The proposals being brought forward for consultation come after Central Bank research in 2016 which highlighted the need for greater transparency for consumers. Some 44 per cent of all mortgage holders surveyed felt that the switching process would be too complex.

Brendan Burgess, the founder of consumer website askaboutmoney.com, said: “This is just an excuse from the Central Bank to pretend that they are doing something. There is no point in meaningless regulation.”

In criticising the bank’s move, Mr Burgess called for them to ban cash back offers from banks so they’d have to compete on mortgage rates “and not on gimmicks”.

The bank’s consultation paper will be open for comment until the start of November this year with interested parties invited to enter submissions.