Dáil Éireann Debate, Tuesday - 26 July 2022
442. Deputy Brendan Griffin asked the Minister for Finance if he is satisfied that customers wishing to switch mortgage providers may do so without undue difficulty at present; if he will review this to examine if the process can be made easier for customers; and if he will make a statement on the matter. [41727/22]
View answerThe Central Bank’s consumer protection framework includes a number of measures to protect consumers who are taking out a mortgage and seeks to ensure that lenders are transparent and fair in all their dealings with borrowers and that borrowers are protected from the beginning to the end of the mortgage life cycle.
The framework includes protections under the Consumer Protection Code 2012 (the Code), the European Union (Consumer Mortgage Credit Agreements) Regulations 2016 (CMCAR), the Consumer Credit Act 1995 (CCA) and the Code of Conduct on Mortgage Arrears (CCMA).
Where a borrower chooses to switch their mortgage to a new lender, the decision to approve the transfer remains a credit decision for the new provider, who will have its own set of acceptance criteria. However, the Central Bank expects that lenders are mindful of consumers’ interests in any decision-making during this period of unprecedented change in the retail banking sector in Ireland.
The Consumer Protection Code 2012 (the Code) applies to regulated financial service providers providing regulated activities within the State. Where a consumer decides to switch their mortgage to a new provider, chapter 5 of the Code requires that regulated entities must carry out an affordability and suitability assessment, prior to offering, recommending, arranging or providing a credit product to a personal consumer. Regulated entities must seek sufficient information from the consumer to understand their needs and their likely ability to repay the debt, before they can offer, recommend or provide a product or service to them.
In addition, in 2018 enhanced measures were introduced to the Code to assist consumers who are switching to another mortgage product with the same lender. These measures were put in place to help consumers make savings on their mortgage repayments. They also provide additional protections to consumers who are eligible to switch, and facilitate mortgage switching through enhancing the transparency of the mortgage framework. These enhanced measures became effective from January 2019.
The mortgage switching measures added to the Code in 2019 require lenders to:
- Tell their consumer about cheaper mortgage options they have available 60 days before they come out of a fixed rate mortgage;
- For consumers on variable rate mortgages (other than on a tracker rate), 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.
- Where the consumer requests, provide 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 are also required to provide a link to the relevant section of the The Competition and Consumer Protection Commission's (CCPC's) website to allow consumers to compare potential mortgage switching savings available from other lenders.
- Clearly explain the pros and cons of any mortgage incentives such as cashback offers;
- Give the consumer all the information they need to switch, including how long the process will take; and
- Give the consumer a decision within ten business days of receiving a completed mortgage application.
The Central Bank has also published on its website research on the area of mortgage switching, an infographic, and an explainer to raise consumer awareness and understanding of mortgage switching rules.
The Competition and Consumer Protection Commission (CCPC) website also provides a "Money Tools" resource and information on mortgage switching for consumers.
Earlier this year I also launched the third phase of the "Switch Your Bank" campaign. Following on from the successful delivery of two advertising campaigns which promoted awareness on the benefits of switching, this phase builds on this work by seeking to identify and develop tools which will better enable consumers to complete their switches.
The Economic and Social Research Institute’s (ESRI) Behavioural Research Unit has been contracted to carry out an experimental research project that will focus on the behavioural aspects of switching, including mortgage switching. The aim of this work is to identify the most successful ways to help consumers to negotiate the complexities of financial products and boost consumers’ decision-making, with a focus on those decisions that have the greatest financial consequences for households.
