DoF study finds benefits in switching, but bank experts give mixed response 

Almost three-quarters of Irish consumers fail to shop around for bank accounts, according to a recent ESRI survey of 3,000 people. File picture: Denis Minihane

A report commissioned by the Department of Finance — which says consumers are losing out by not shopping around or switching their mortgages, current accounts, and credit cards — has received a mixed response from banking experts.

The report by the behavioural research unit at the ESRI, which surveyed 3,000 people, found many consumers do not compare rates despite differences that could cost them dearly over time.

The survey found that: 

• 73% of consumers fail to shop around for bank accounts;
• 68% fail to survey their options for loans, 
• 74% opt not to compare costs of credit cards, and 
• 46% did not compare offers, even when getting a mortgage, despite differences in interest payments that can add up to tens of thousands of euro.

Switching could help customers, “but many feel unable to do so”, said Pete Lunn, head of the ESRI's behavioural research unit.

However, leading industry experts say the structure of Irish banking puts limits on the scope of consumers to find better deals.

Brokers Ireland director of financial services Rachel McGovern said the research is right to identify that people do not shop around enough, but that the range of mortgage products has narrowed since the departure of Ulster Bank and KBC Bank, while the banking market turmoil of recent weeks will likely make matters worse. 

Switching mortgage providers in Ireland “is not as easy as it should be”, she added.

Brendan Burgess, founder of Askaboutmoney.com, said shopping around for current accounts may not generate significant savings, and that the long-term costs of cashback deals make comparing mortgages more difficult. He said: 

If the Government is serious about promoting competition, then they should ban cashbacks, and banks should compete on mortgage rates alone.

Mr Lunn said that there was still “a huge variation” in the rates for mortgages, loans, and credit cards.

He agreed that cashback mortgages make it harder for consumers to compare rates, but that the competition watchdog’s website helps in comparing long-term costs.

Stephen Hamilton at broker MortgageLine said customers should always consider switching banks.