Following the release of the Central Bank’s Consultation Paper on Transparency and Switching in the mortgage market, Fianna Fáil Spokesperson for Finance, Michael McGrath has said ‘cash back’ offers should not be permitted in the mortgage market and instead lenders should be forced to compete on interest rates.
Deputy McGrath commented, “Lenders are taking advantage of the lack of switching in the mortgage market by charging higher rates than are justifiable.
“Today’s Central Bank consultation paper is a welcome step in the right direction and needs to be backed up with practical actions to make switching mortgage provider easier and less hassle for consumers.
“I welcome the fact that the Central Bank now acknowledges that promotional offers like cash backs are a serious issue. It would be far better for consumers overall if lenders competed on interest rates rather than ‘cash back’ offers.
“In many cases, the consumers pay for the ‘cash back’ many times over by paying a higher rate of interest for the entire duration of the mortgage.
“It is also our view that, as their loan to value (LTV) ratio falls, consumers should be able to benefit from the lower interest rate attached to that LTV. This is currently not the case with all lenders. Some customers are locked in to paying the higher interest rate associated with the LTV they had when they first took out the mortgage. This is fundamentally unfair on consumers and needs to be changed.
“Fianna Fáil will be making a submission during this consultation period and we look forward to seeing tangible measures implemented that make it easier for mortgage holders to switch and ultimately help them to get a better deal on their mortgage,” concluded McGrath.