Mortgage lenders urged to advise more on switching

Lenders have to do more when it comes to advising customers about switching their mortgage plans, the Central Bank has warned.

Research by the Central Bank has revealed that almost half of 2,000 mortgage holders surveyed believed it would be too complex to change their mortgage plans. More than a third who did change plans felt there was too much paperwork and red tape involved.

More than a third said that additional fees when switching mortgages with their lender put them off, while the majority said they would consider switching if they could be certain they would make a saving over the lifetime of the mortgage.

Just over a quarter of mortgage holders reported no obstacles to switching their mortgage and four out of five said they understood every step of the process when they did make the change.

Bernard Sheridan, the acting deputy governor of the Central Bank, said the research shows that borrowers who actually switched their mortgage had a positive experience.

“It is also clear that lenders could be doing more to facilitate consumers who are thinking about switching, be that switching to another lender or to another mortgage product with the same lender,” he said.

“Lenders need, therefore, to examine these findings carefully. The Central Bank will progress its work in this area by publishing a consultation paper later this year which will set out proposed measures to help any consumer who is considering switching.”

The Central Bank will examine whether lenders can provide greater clarity to consumers on the switching process itself, including timeframes and potential costs.

It will also examine the benefits of lenders having dedicated switching contact points, and whether further disclosure rules at trigger points in the mortgage life cycle, such as at the end of a fixed interest-rate term, should be introduced.

The regulator will also examine the scope for increased co-operation among lenders during the mortgage switching process.

The Central Bank is currently examining 2m accounts following the tracker mortgage scandal, which found that lenders had wrongly taken mortgage holders off trackers in the midst of the financial crisis.

Up to €500m could be paid out in compensation to mortgage holders when the review is complete, the Central Bank has said.