Changes to the Central Bank’s Consumer Protection Code, which aim to increase the levels of mortgage switching in Ireland and to provide greater levels of transparency for consumers, come into effect today.
The changes, which were announced in June, follow research by the Central Bank in 2015 which found over one fifth of borrowers could save money by switching their mortgage, yet few do so.
Among the changes, lenders are now required to let customers know at least 60 days in advance that they’re about to come off a fixed interest rate and to provide details of the new rate that will apply from the expiry date. Lenders will also have to provide mortgage holders with information on other possible options that may be available to them.
For consumers on a variable rate mortgage (other than a tracker rate), lenders are now required to notify mortgage holders every year as to whether they could get a cheaper interest rate as a result of a change in their loan-to-value ratio.
The changes also introduce a required 10-day turnaround for a decision on a fully completed mortgage application and for the lender’s switching pack to include standardised, prescribed information.
Commenting on the new changes, Daragh Cassidy, Head of Communications at price comparison and consumer website bonkers.ie said that although the level of switching in the Irish mortgage market remains chronically low at less than 1%, "anything which facilitates switching is to be hugely welcomed".
"Quite often we find that customers don’t bother trying to switch mortgage as they feel the process is too cumbersome and because they don’t realise the potential savings involved. These changes to the Consumer Protection Code should help to address that," he said.
Outlining the savings to be made with switching, Mr Cassidy gave the example of a person who has a mortgage of €250,000, and paying a 4.3% standard variable rate could save over €250 a month, or over €3,000 a year, by switching to the cheapest rate on the market. "While there are some upfront costs associated with switching mortgage provider, in many cases banks will provide cashback to those who switch or a contribution towards the legal fees," he said.
Mortgage holders who have been with their mortgage provider for a few years are encouraged to review their options and see whether they could save by switching to a better deal.