The Central Bank plans to make it easier for home owners to switch mortgage providers. Figures published by the regulator yesterday pointed to the fact that four in five mortgage holders have not even considered switching providers.
Frank Conway, founder of Moneywhizz, which promotes greater levels of financial literacy, said there was a complex set of reasons behind people's reluctance to switch. "If you look back to 2005-2006, there was a vibrant market with competition from the likes of Bank of Scotland. But what has happened since has been a collapse in the pillars underpinning the switching market. Equity in property has fallen, there has been a rise in arrears - which has affected credit profiles - and a huge cut in wages, which underpins the ability to repay. A combination of these factors undermines the ability to switch," he explained.
Mr Conway said recent figures appeared to point to an uplift in switching behaviour in recent months with rising property prices helping. "Anecdotally, people are aware that they're on a higher rate and that there are offers out there. Figures from the Banking and Payments Federation indicate that in the final quarter of last year, the switcher market was the fastest growing of all segments," he said.
Frank Conway pointed to the magnitude of the potential savings over the lifetime of the loan. "On a mortgage of €250,000, you could be looking at savings of €50,000 to €60,000 if you're on a high rate and have a good loan to value ratio," he explained.
He said the key ingredient for switching was competition and that looks like it is re-entering the market with banks starting to get the message out. "The biggest issue is equity in the property. The biggest difficulty for banks is that they don't want to drive a campaign when they may get a lot of people who don't have the equity or the income," he concluded.
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