Mortgage holders leaving thousands of euro on the table by failing to switch home loan providers – CBI research

Mortgage holders are leaving thousands of euro on the table by failing to switch home loan providers, according to new research by the Central Bank of Ireland (CBI).

Three in five eligible mortgages could save more than €1,000 in the first year after switching to a cheaper lender and more than €10,000 over the remaining term of the loan, the research found.

Yet fewer than 3pc of borrowers switched providers in the second half of 2019, suggesting there are significant barriers to moving easily from one lender to another.

The findings were published today in a new economic letter from the CBI that included a detailed review of switching activity in the Irish mortgage market.

The report’s authors found that, although switching activity among private dwelling home (PDH) borrowers had increased, the number of mortgage switchers is still low relative to the pool of those eligible.

They said the low appetite among borrowers to move to a cheaper mortgage persisted despite falling interest rates and policy initiatives designed to help switching.

Instead, eligible borrowers tended to stay with their lenders, even though 72pc could save up to one-tenth of their annual repayment costs if they moved to a cheaper provider.

The researchers found that first-time buyers and those with mortgages dating from the peak years of the housing bubble were the least likely to take advantage of better deals. They suggested that low levels of financial literacy and education could be factors behind the inertia.

Irish banks have on average some of the highest mortgage interest rates in the eurozone, although prices have been falling in line with loose monetary policy from the European Central Bank.

The research classified an eligible borrower as someone with a performing mortgage and no arrears on a variable rate mortgage or a fixed rate product with less than 12 months remaining on the term. The outstanding balance had to be at least €30,000 and the loan-to-value ratio below 90pc.

Article Source: Click Here

< Back to News