The Consumer Director of the Financial Regulator, Mary O'Dea, has warned that mortgage lenders must act in the best interests of their customers when providing advice on switching tracker mortgages to fixed or variable-rate mortgages.
Ms O'Dea said: "Mortgage lenders must make sure that they understand each consumer's individual needs and circumstances before recommending that any consumer switches from his or her current mortgage. Lenders must be able to demonstrate compliance with the Statutory Consumer Protection Code.
"In particular any recommendation must be in the consumer's best interests and they must recommend a mortgage that is more suitable for the individual consumer than the tracker mortgage. Lenders should fully disclose the short, medium and long-term effects of switching to each consumer."
She said that "lenders must be in a position to demonstrate how they have concluded that each consumer's tracker mortgage is no longer suitable for them".
She also advised consumers thinking of switching from tracker mortgages to make sure they are fully aware of the consequences of making such a switch.
She said: "Consumers with tracker mortgages automatically benefited from the recent interest rate decrease. If you switch to a fixed-rate mortgage you will lose the potential benefit of a rate decrease.
"On the other hand, you will not have to pay any increases so long as the rate is fixed. If you switch to a variable-rate mortgage, that is not a tracker, you will not be automatically entitled to benefit from rate decreases.
"You should also be aware that tracker mortgages are no longer widely available to new customers. Consumers who may be offered an incentive to switch from their tracker mortgages should ask their lender or mortgage broker for a clear written explanation of why this is a more suitable option," she said.
Information on different types of mortgages and also on how to manage finances is available on the Financial Regulator's website itsyourmoney.ie.