New research from the Central Bank reveals that three in every five eligible mortgage holders could save up to €1,000 within the first year if they switch mortgage provider, and more than €10,000 over the remaining term of their loan.

The Central Bank said there has been an increase in switching activity among home owners in recent years. 

But it added that switching activity still remains low relative to the outstanding pool of eligible switchers, and stood at just 2.9% in the second half of 2019. 

It said its findings suggest there is a weak appetite among eligible borrowers to engage with mortgage switching options in Ireland.

This is despite the decrease in interest rates and the recent introduction of policy initiatives designed to improve the switching process.

The Central Bank's latest Economic Letter entitled "Room to improve: A review of switching activity in the Irish mortgage market" was authored by Shane Byrne, Kenneth Devine, and Yvonne McCarthy.

The research found that the distribution of potential savings from switching varies depending on the type of borrower and their age profile and suggests that there are higher average potential savings among younger borrowers and first time buyers.

It also reveals that 81% of switchers opt to take up a fixed mortgage when they switch, and the average interest rate payable among switchers is almost a full percentage point lower than non-switchers.

The research also examined potential barriers to mortgage switching among different types of borrowers and it found that those with lower levels of financial literacy and education are more likely to exhibit a high degree of inhibition to switching. 

"Notably, this high inhibition category includes a higher share of first-time borrowers, and borrowers who took out mortgages during the peak years of the housing boom," the Central Bank said.

The letter said the new insights underline the importance of policy design that takes into account the diverse obstacles that may influence patterns of engagement and inertia in the Irish mortgage market. 

"This is especially important in cases where household action correlates with existing sources of vulnerability among consumers," it stated.

The Central Bank said the Covid-19 pandemic has also placed pressure on a significant number of borrowers and may, understandably, dampen switching activity. 

Reacting to the Central Bank report, Labour Finance spokesperson Ged Nash said that the Government was in dereliction of duty by failing to do anything to inform the public about the savings available from mortgage switching.

"The numbers in today's Central Bank report are incredible. Around 112,000 mortgage accounts with the five main lenders could save over €1,000 in the first year by switching, and 98,000 could save at least €10,000 over the term of the mortgage.

"That means there is at least €1 billion in mortgage savings out there for the public, with over €236m available to be saved by the public in the first year alone," he said.

"It is just not acceptable that the Government is doing absolutely nothing to inform the public about the savings that are out there," he added.