Lack of real competition in market requires policy response from Central Bank
Fianna Fáil Finance Spokesperson Michael McGrath has renewed his call for a statutory code of conduct on mortgage switching to be introduced to protect consumers who wish to switch their mortgage from one mortgage provider to another.
Deputy McGrath stated, “Earlier this year, the Central Bank report on mortgage switching showed that a paltry number of mortgage switching transactions are actually being completed in the market. The report indicated that an average of just 38 switcher mortgages was completed per month at the 5 main banks since January 2014.
“The number of switches completed is a drop in the ocean in the context of 300,000 residential variable rate mortgages, many of which are on rates of between 4% and 4.95%. The stark reality is that it is not as easy as Minister Noonan would have us believe to switch your mortgage from one bank to another. The banks are quite satisfied to maintain the status quo in the Irish mortgage market where product innovation is frowned upon.
“There is now a clear case for the Central Bank to introduce a statutory code of conduct on mortgage switching. The Central Bank has a successful code in place for the switching of current accounts from one financial institution to another. The same now needs to be done for mortgage holders who wish to switch their mortgage. A statutory code on mortgage switching would set out in detail the obligations on financial institutions involved in a mortgage switching transaction. A strong code would provide certainty to mortgage holders about the process involved and ensure the mortgage holder’s rights are protected.
“The customers who could benefit most from lower rates are those who are least likely to be facilitated to switch mortgage including customers with arrears, those in negative equity or above 90% loan to value. The Central Bank should use its influence over the banks to impress upon them that such customers should be facilitated in moving to a cheaper rate when it is available and the most effective way of achieving this is through a statutory code,” concluded Deputy McGrath.