The bank’s head of consumer protection Bernard Sheridan yesterday formally launched recently-leaked additions to the consumer protection code making mortgage lenders’ terms more transparent.
As of next February, lenders will need to better explain to customers reasons for variable interest rate rises, the factors leading to the setting of rates and alternative options available at lower rates.
Earlier this week, Fine Gael MEP Brian Hayes welcomed the changes but called for a specific code of conduct on switching, saying standalone legislation is needed to establish a simple switching procedure.
Mr Sheridan agreed it is a concern that lenders are able to set their own rates knowing that there is virtually no switching culture among Irish mortgage holders. However, he said these additions will help consumers gain more knowledge of the market.
“It is not our role to promote switching, but it is our role to ensure lenders are not putting impediments in place [to prevent it],” he said, adding that introducing a switching code of conduct without properly finding out what the impediments to switching are would be “too simplistic”.
The Irish Brokers Association welcomed the moves, but said they would only apply when rates are raised again and have, effectively, been introduced too late.
“What mortgage holders really need is for banks to be put under pressure, through legislation, regulation and/or competition to reduce their rates and bring them in line with the average across the eurozone,” said IBA chief Ciaran Phelan.
Mr Sheridan said the Central Bank will be working on researching the impediments to switching, from the point of view of consumers and mortgage intermediaries, up to the end of the year before making further recommendations and said these changes represent a good start in identifying the problem.
“The measures we are introducing will require lenders to be more transparent with borrowers about how they set their variable interest rates, including in the event of an increase,” he said.