New measures to make it easier for people to switch mortgages

Changes are being made to the Consumer Protection Code by the Central Bank

New measures to make it easier for people to switch mortgages

File photo shows Governor Philip Lane speaking at the 2017 Central Bank review of residential mortgage lending requirements | Image:

The Central Bank is to make it easier for people to switch their mortgage.

It is introducing changes to the 2012 Consumer Protection Code, to help consumers make savings on their mortgage repayments, provide additional protections to those eligible to switch, and facilitate mortgage switching through enhancing the transparency of the mortgage framework.

It will also see standardised mortgage switching information for consumers.

The changes follow a public consultation process.

They also build on existing protections already in place for mortgage borrowers introduced for variable rate mortgage holders in 2016.

The new measures take effect from January 1st 2019.

The changes follow research by the Central Bank from 2015 which found that, based on the analysis of over 500,000 mortgages, up to 21% of borrowers could save money by switching.

Of those mortgages that could save money, some 16,000 could save over €1,000 in the first 12 months - and around 27,000 have the potential to save more than €10,000 over the lifetime of the mortgage.

Source: Central Bank

It said consumer research conducted last year showed the need for "greater transparency in information for consumers", which would clearly inform them about the potential savings they could make by switching - and the switching process itself.

Six sets of changes are being made:

  • For consumers with fixed rate mortgages, lenders are required to inform their consumers at least 60 days in advance that they are about to come off their fixed rate and provide details of the new rate applicable from the expiry date. The lender should provide information on other possible options that may be available to the consumer
  • For consumers on variable rate mortgages (other than on a tracker rate), lenders will be required to notify consumers every year as to whether they can, or cannot, move to a cheaper interest rate as a result of a move in their Loan to Value interest rate band, subject to the provision of an up-to-date valuation and any other requirements that may apply.
  • In relation to potential switching savings, the changes would require all lenders to provide, on request, an indicative comparison of the total interest payable on the consumer’s existing mortgage and the interest payable on the new mortgage or alternative interest rate on offer by that lender. Where the lender provides this information, they would also be required to provide a link to the relevant section of the CCPC’s website to allow consumers to compare potential mortgage switching savings available from other lenders
  • The changes will impose a time-bound mortgage application process on lenders, including requirements to acknowledge receipt of a completed mortgage application within three business days and make a decision within 10 business days following receipt of all required information for assessment of a mortgage application
  • In relation to incentives, the existing provision in the code will be extended to apply the same protections to all mortgage holders i.e. for new, existing and switching mortgage holders
  • The standardised pack of switching information from the lender is to at least include the lender’s mortgage switching guide, including prescribed information; application forms; and information on timelines, mortgage process and documents required from the consumer
The Central Bank in Dublin | File photo

Gráinne McEvoy, director of consumer protection, said: "The consumer protection rules we are announcing today are focused on assisting consumers with lowering their mortgage repayments, where possible.

"Our research has shown that one in five mortgage holders could save money by switching their mortgage, and that significant numbers can make substantial savings.

"While information to help consumers compare mortgage rates is widely available, including the CCPC’s online mortgage comparison tool, our research also shows that some of the reasons people don’t switch their mortgage is because they don’t realise how much money they could save and also find it difficult to compare mortgages.

"These changes are aimed at making it easier for consumers to obtain this key information so that they are able to easily identify whether they are able to make savings by switching their mortgage, and make the process quicker and easier to complete if they do decide to switch."