‘Banks must explain mortgage switch options more clearly’

THE Central Bank has warned that banks arelacking clarity and transparency when communicating with customers who switch their mortgage product from a tracker rate to a variable or fixed rate.

The bank is now calling on lenders to include full information on the ‘small print’ consequences to customers of switching loan product, specifically from a tracker mortgage to alternative rate loans.

The calls came following the publication of its examination into switching practices relating to tracker and other mortgage products, based on studies it carried out over the past two years. The bank found that, in numerous cases, communication on the financial implications and consequences of switching weren’t fully transparent to the customer. The Central Bank said: “As a result of this finding, mortgage lenders have been requested to fully disclose the impact of any switch from a tracker mortgage rate in all customer communications, with immediate effect. Customers must be notified that switching from a tracker rate may mean they’ll lose the ability to avail of a tracker rate mortgage in the future.”

The Irish Brokers Association has urged anyone feeling pressurised into switching from tracker to other mortgages to seek advice from independent brokers.

“It’s difficult to countenance any reason for consumers to willingly give up a tracker mortgage in favour of a fixed or variable rate,” said IBA chief executive Ciaran Phelan.

The Professional Insurance Brokers Association called the report a step in the right direction to gaining greater transparency for customers. It is also recommending people still on tracker mortgages should remain with them.

Separately, a “misclassification” of mortgage customers, by Permanent TSB, has resulted in the bank overcharging consumers by a combined €1.5 million.

Around 300 of the bank’s fixed-rate mortgage customers were overcharged, and had not been offered a tracker mortgage rate when initially applying for their loan.

Those affected will now receive a refund of €5,000, plus interest and the option of switching to a new tracker mortgage at backdated interest rates.