Banking sector sets new criteria for mortgage-holders to switch lender

As part of new supports, credit servicing firms are to work closely with Mabs to agree repayment plans for customers in financial difficulty

BPFI chief executive Brian Hayes said supports available from providers 'apply to those who may already have missed a repayment as well as to those customers whose payments are fully up to date but feeling under financial pressure'. Picture: Daragh Mc Sweeney/Provision

Banks and non-bank lenders have agreed a new set of eligibility criteria which would make it easier for customers of credit servicing firms to switch their mortgage to another provider, the Banking and Payments Federation Ireland (BPFI) has announced.

Credit servicing firms are employed by owners of the loan to deal with the borrower on their behalf.

This move comes following calls from Finance Minister Michael McGrath last week for the banks to show support to mortgage-holders who are finding themselves in difficulty following numerous interest rate hikes from the European Central Bank over the last year.

The three pillar banks — AIB, Bank of Ireland, and Permanent TSB — along with Avant Money, Finance Ireland and ICS Mortgages have agreed to the initial criteria.

The BPFI said credit servicing firms have committed to working with these criteria to support customers switching and to ensure they are aware they may have options to switch their mortgage.

To be eligible to switch under these guidelines, customers need to be making full capital and interest repayments on their mortgage. Customers must also be able to demonstrate they have sustainable income which is adequate to repay the mortgage in full over the lifetime of the loan.

No arrears

In addition, customers must have no arrears on their home mortgage or any other lending in the past two years. Applications will be assessed on a case-by-case basis in line with individual lender credit policy.

Mortgage broker representative bodies Brokers Ireland and the Association of Irish Mortgage Advisors have also agreed to communicate these criteria to borrowers seeking to switch their home loans.

BPFI chief executive Brian Hayes said while they acknowledge not all customers will be eligible to switch due to their individual circumstances, “our key objective today is to provide clarity on the initial required criteria to switch”.

“If customers of credit servicing firms wish to explore their switching options, we encourage them to consider their individual circumstances against the initial eligibility criteria,” he said.

As part of the new supports announced by the industry, credit servicing firms are to work closely with the Money Advice and Budgeting Service (Mabs) on a streamlined “customer engagement framework” which should accelerate the “agreement of sustainable repayment plans for customers in financial difficulty”.

This will involve bi-weekly forums with Mabs regional offices to discuss individual cases and affordable and sustainable solutions for customers. It also involves an escalation process for cases which are particularly sensitive.

Financial difficulties

The BPFI also launched an information campaign to highlight some of the options available to borrowers who find themselves in financial difficulties.

The organisation is pointing people towards its online resource DealingwithDebt.ie, which provides information on how lenders will work with customers who are at risk of missing a repayment or are already behind on their repayments.

The BPFI encouraged all borrowers experiencing difficulties paying their mortgages or making other repayments to contact their lenders as soon as possible.

Mr Hayes added the supports available from providers “apply to those who may already have missed a repayment as well as to those customers whose payments are fully up to date but feeling under financial pressure”.