Irish home buyers lose out on deals for mortgages

The consumer watchdog is to examine if prospective house buyers may be losing out due to the lack of competition in the Irish mortgage lending market.

The Consumer and Competition Protection Commission (CCPC) has launched a consultation process aimed at putting in place a mortgage market which is “competitive, open to entry and serves the needs of consumers”.

In a report accompanying the launch CCPC points out that, according to research carried out by the Central Bank, the three main banks in Ireland currently control over 80% of the mortgage lending market.

“Currently, by any measure, the structure of the market for mortgage lending in Ireland is highly concentrated, i.e. there is a limited amount of competition and this may be leading to poor outcomes for consumers,” the report finds.

A mortgage market with such a high level of concentration “may lead to direct or tacit co-ordination”, according to the CCPC, which says this is a “significant impediment to competition”.

“Based on the concentration levels and survey data compiled by the Central Bank, it has been argued by some market commentators that Irish consumers are not enjoying the benefits of a highly competitive mortgage lending market, which would comprise lower prices, innovative products, and wider choice.”

The CCPC points out that some commentators argue that the weak level of competition in the mortgage lending market is reflected in the variable interest rates charged here — which are among the highest in the eurozone.

This has led to proposed legislation to give the Central Bank powers to set a ceiling on the amount lenders can charge for standard variable mortgages.

Ther CCPC report also examines why new lenders may be unwilling to enter the Irish mortgage market - pointing out that the number of people in arrears here may be a contributing factor.

“From a lender’s perspective, the scale of mortgage distress may mean that mortgage lending is perceived as inherently riskier in Ireland than other EU member states,” the report says.

“In addition, aside from default, market commentators have also said that the ability to effect loan security is perceived as more challenging in Ireland.”

The CCPC is now planning a public consultation on the issue and interested parties are invited to respond to the consultation in writing by no later than 5pm on March 20.

CCPC chairperson Isolde Goggin said a mortgage is likely to be the biggest financial commitment most people make in their lifetime.

“We know that the Irish mortgage market has undergone a period of crisis and that, currently, it is highly concentrated,” she said. 

“This impacts on consumers, both in terms of the options available to them when taking out a mortgage and those considering switching. It also has an impact on the likelihood of new firms entering the market and providing choice, product innovation and competition.”



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