Irish MEP Brian Hayes has called for the next government to introduce legislation to make it easier for consumers to switch mortgage lenders to prevent them being "ripped off" by banks with high variable interest rates.
“The Competition and Consumer Protection Commission (CCPC) recently published a survey that showed only one-in-seven Irish mortgage holders have thought about switching and only 2 per cent have actually switched in the past five years,” Mr Hayes said.
“If we look at Italy, they have brought in a specific switching mechanism which makes it easy for consumers to switch mortgage loans. This is a practice that the major Italian banks have to comply with and is a no-cost procedure for the borrower.”
In Italy, when switching, the new capital borrowed must be the same as the amount outstanding on the mortgage. The borrower can change the type of interest rate – fixed or variable – and the length of the loan term.
In addition, the switching must take place within 30 days from when a request is made to the new lender. “This is all written into Italian legislation and in 2015, 32 per cent of new mortgages in Italy were generated through consumers switching to another provider,” Mr Hayes said.
“The Dáil and the next government needs to take example from Italy by introducing standalone legislation to set up a specific switching mechanism. If we had switching rates anywhere near Italy’s, mortgage rates would be much lower in Ireland.
“The average variable mortgage rate in the euro zone is almost 2 per cent lower than in Ireland,” said Mr Hayes, who has argued that the European Commission should bring in rules to allow borrowers to switch mortgages on a cross-border basis.
Lower rates
“We are in a single market, we have a European
Central Bank
which sets the main interest rate for banks, so there is no reason why a mortgage holder in Ireland should not be able to switch to a provider in Germany or France to avail of a lower rate.”
Figures from the Banking & Payments Federation Ireland show that 1,338 home loans were remortgaged last year to a value of €290 million. This reflects customers switching from one provider to another.
However, the scope for mortgage switching here is limited by the fact that some 50 per cent of existing mortgages are on low tracker rates.
In a statement, the Central Bank of Ireland acknowledged that there is no code of conduct for mortgage switching here but said facilitating customers to switch was “an important one” for the regulator.
