Bank plan could save thousands on mortgages

Homeowners could save tens of thousands of euro if new Central Bank proposals on switching mortgages are implemented, according to financial experts.

The Central Bank has put forward proposals that would make lenders co-operate with each other if a mortgage holder wanted to switch, as well as making it easier for people to compare their existing mortgage to other mortgage options.

The proposals, which are out for public consultation until November 1, also reference providing consumers with standardised switching information.

Nicholas Charalambous, managing director of Cork-based financial services firm Alpha Wealth, said the measures could “absolutely” save customers five-figure sums on their mortgages if implemented properly.

“There are massive savings to be made by switching, especially for the cohort that may have bought properties post-financial crash.”

Mr Charalambous pointed to an example of a couple with €250,000 left on a 20-year mortgage, where potentially more than €1,800 could be saved every year, resulting in savings of almost €40,000.

“At, say, 4.5% interest rate, which is Bank of Ireland’s current variable rate on an 80%-plus loan-to-value of €1,581.62 per month, which over 20 years would be a total repayment of €379,588.80,” he said.

“At 3.3% [offered by both KBC and AIB], monthly payments would be €1,424.34 per month, which over 20 years would be a total repayment of €341,841.60. This is a difference of €37,747.20 over the mortgage term.”

The Central Bank proposals come as banks in recent months have faced the wrath of customers wrongly moved off tracker mortgages onto more expensive loans.

Financial adviser Padraic Kissane, who was at the heart of uncovering the scandal, said the new Central Bank measures, while helpful, fundamentally missed an opportunity to address an unfair system for customers.

“Lenders are still gouging customers to retain profit,” said Mr Kissane. “There is no reason a customer should not be able to pick a mortgage in the EU, with lower rates... The intentions of the Central Bank are good, but why treat the symptoms and not the illness?”