CCPC: Increase mortgage market competition

Increasing competition for consumers and the adoption of the so-called “Danish model” would improve the current “dysfunctional” mortgage market which has an unhealthy level of mistrust between customers and lenders, the chair of the Competition and Consumer Protection Commission (CCPC) has said.

Isolde Goggin was speaking at the Oireachtas finance committee as options for the Irish mortgage market were discussed. She said there was a need for a “national vision” as to what was needed from a mortgage market.

“We think increasing competition is also extremely important. More new entrants would in turn increase competition. Rebuilding our international reputation is central to this, getting the message out there that we are working through the problems and we are an attractive option for reputable new entrants,” she added.

The Danish model had worked very well and should be examined as a pilot by the Central Bank, she said.

“This model is characterised by match-funding. There is a direct match between the loan and the bonds which a mortgage bank issues to fund the loan,” she added.

The CCPC had put forward 14 recommendations to improve the market, with mistrust prevailing among customers “at a high level”, she said.

That mistrust led to consumers being reluctant to switch providers or enter long-term agreements, added Ms Goggin.

“In the course of our research with consumers it also became apparent that there is a real sense of vulnerability which manifests itself in a number of ways, including a reluctance to consider switching mortgage providers or lock into long term mortgage rates...what consumers said that they primarily wanted from the market was to be able to get a mortgage, to have certainty around what they were paying for their mortgage and a clear, fair process if they to find themselves in arrears,” she said.

A National Housing Co-Operative would help alleviate the crisis in mortgage arrears, members of the Right2Homes organisation told TDs and Senators. Right2Homes produced its proposed legislation for the housing co-op.

The bill was praised by Sinn Féin’s Pearse Doherty, who described the proposed co-op as a “Nama for the wee guy”.

Right2Homes co-founder Brian Reilly said: “Some of us have literally put our own lives on hold to get this proposed legislation to this point and I doubt there is anybody who isn’t already acutely aware of the nightmare currently being faced by so many Irish families, still residing in their family homes, or indeed in buy-to-lets, all of whom live in daily fear of the banks, afraid to open their hall doors, or even their post, defenceless in the absence of effective legislation to protect themselves, and their families, from the threat of repossessions.”

Right2Homes said under its proposal, the National Housing Co-Operative would purchase properties in distress and the related debt from the lending bodies. It would then restructure new mortgage contracts over 30 years with repossession only in extreme “can pay but won’t pay” cases.

It said the capital required would be raised by the issue of a 20-year property bond, secured by the properties acquired by the co-op and underpinned by a guarantee issued by the European Investment Fund.


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