€10,000 in mortgage savings but experts say Central Bank has role to help switchers

Broker says the best way to encourage switching is to cut the "excessively complex" process that requires the same amount of documentation to change lenders as it does to secure a mortgage from scratch

The process of switching a mortgage to a rival lender could be curtailed from months to a matter of days by the Central Bank. Picture: iStock

Switching a mortgage to a rival lender will save thousands of Irish borrowers over €1,000 in the first year, and more than €10,000 over the lifetime of the loan, according to new Central Bank research, which pins the blame for borrowers' inertia on factors including poor financial literacy and education. 

However, leading mortgage brokers said the Central Bank could do a lot more in driving change and make it much easier for a borrower to switch loans by severely reducing the amount of documentation required to switch a mortgage and by publicising more widely the huge savings available. 

The research, called 'Room to improve: A review of switching activity in the Irish mortgage market', identified more than 112,720 existing borrowers who could immediately save €1,000 in the first year after switching, and almost 110,500 borrowers who could tap the €10,000 in savings over the full term of their loan.

The inertia was caused by a number of factors, including "gender, education, financial literacy, and behavioural characteristics", according to the Central Bank. 

"Switchers tend to have higher average mortgage balances, higher average valued properties, and shorter remaining mortgage terms," the research said.

A significant proportion of mortgage holders report a lack of knowledge or worry about the prospect of switching.  

However, Michael Dowling, managing director at broker Dowling Financial, said in his experience the best way to encourage switching is to cut the "excessively complex" process that requires the same amount of documentation to change lenders as it does to secure a mortgage from scratch.

The process of switching could be curtailed from months to a matter of days by the Central Bank allowing lenders to accept a payslip and an employer's letter because the banks have access to up-to-date payment history from the Irish Credit Bureau. 

Trevor Grant, chairperson at the Association of Irish Mortgage Advisors, said that the Irish market was "now ripe for switching". 

"The crux of the matter for mortgage holders is their bank would prefer if they didn’t switch. And whilst they may offer their customer the lowest rate, they are not obliged to advise them specifically that there are better terms available elsewhere," Mr Grant said.