I was recently contacted by a mortgage-holder who has been annoyed by recent ads from their bank promoting their options for existing customers. They felt the bank suggests the process is far more straightforward than is actually the case. This customer is far from alone in feeling like this.
The Competition & Consumer Protection Commission (CCPC) recently published a Mortgages Options Paper, aimed at helping to develop a better-functioning mortgage market. Switching was one of the key areas of research. Research found just 6% of mortgage holders have considered switching their mortgage provider over the past 5 years and only 2% have actually switched.
"We were looking at ways of making the switching process easier," CCPC Director of Communications Áine Carroll said. "We did a lot of research, including focus groups with consumers in Dublin, Galway and Cork. There were different groups represented, some had experience of switching, others not. What we wanted was to find out what worked and what didn't."
For some people switching is not an option. But many who could benefit from a switch cited not knowing how to go about it, the costs or the effort and time involved as reasons why they didn’t.
It is important to acknowledge that switching your mortgage is not like switching other financial products. If you switch utilities or car insurance and you do not like the new provider or their service, you will have an option to switch again. Even a more complex product like health insurance, which has many variables to compare, comes up for renewal again in a year.
"Mortgage switching is not something you are going to do repeatedly," Ms Collins said. "Consumers should think of it as getting a new mortgage, which it basically is. That way you will be more accepting of the level of paperwork involved. And at least it is getting a new mortgage without the stress of buying a new house. So yes it is a lot of work but it comes with a big reward, potentially saving thousands."
The CCPC has a mortgage rate change calculator at consumerhelp.ie, allowing homeowners to see exactly what they could save and compare different switching options.
But even allowing for the justifiable complexity, the CCPC believes a lot more could be done by both banks and regulators.
Of those they surveyed who had switched their mortgage the main negatives identified were it involved too much paperwork, it was a complicated process and took a long time. 35% estimated that the switching process took between one and two months and 24% estimated that the process took longer than two months. The CCPC proposed that they work with the Legal Services Regulatory Authority to facilitate the introduction of e-conveyancing. It also suggested the Department of Finance and the CBI with the CCPC should establish a working group to facilitate the development of automated switching processes.
Another issue is around the sweeteners offered for switching. “There is no doubt that cashback offers are distracting and exploit the fact that consumers can be swayed with short-term savings,” Ms Carroll said. “But in the long run, a better rate will save people far more. You could be talking €2000 to €3000 cashback versus tens of thousands over the lifetime of a mortgage.” The CCPC has suggested a working group to examine the appropriateness of such offers.
Hopefully the relevant government departments and the banks will take the CCPC suggestions on board and make the whole process easier for consumers. But for the moment, if you are considering switching the advice is - go in with a clear understanding of the work and time involved. There is no doubt it currently involved quite a lot of hassle but in the long run, it could still save you substantial amounts of money.
DEAL OF THE WEEK
Parents planning to use public transport for their families as the school holidays get underway have been handed a boost by Leap Card.
Their Kids Go Free promotion started yesterday and run until Sunday July 16 (inclusive).
Child Leap Card holders can travel free on all Dublin Bus scheduled services, all Luas services, all DART services and on all Commuter Rail services in Dublin’s “Short Hop Zone” and on the Cork to Cobh/Midleton train lines.
They can also use Bus Éireann services where Leap Card Validators are available. This includes Bus Éireann Services in Cork city, Limerick city, Galway city, and Waterford city and Bus Éireann services in Dublin and nearby counties.
Anyone with a child Leap Card (4-15 or 16-18) can simply use their card as normal. Those who don’t yet have a card can get one at leapcard.ie.
There is a limited stock of free cards for 4-15 year olds available at Dublin Bus Head Office and at the main stations in Cork, Galway, Limerick and Waterford.