A number of measures are in place to support households facing rising interest rates. In particular, the Central Bank has in recent years introduced a number of protections for variable rate mortgage holders which can help mortgage holders identify lower cost mortgage options.
Firstly, it made changes to the Consumer Protection Code to require mortgage creditors to explain to borrowers how their non-tracker variable interest rates have been set and to clearly identify the factors which may result in changes to variable interest rates.
Secondly, it also increased the level of information lenders are required to provide their customers including where there is a possibility for the borrower to move to a lower ‘loan to value’ interest rate band and signpost the borrower to the Competition and Consumer Protection Commission's mortgage switching tool.
More recently, on 31 August 2023 I met with the mortgage industry including the Banking and Payments Federation Ireland (BPFI), CEOs and senior representatives of all the main mortgage lenders and servicers.
I made it clear that banks and all other mortgage entities should be fully aware of the significant challenges that some of their customers are facing and, therefore, lenders and servicers should respond by assisting their customers who are experiencing difficulty.
In relation to customers’ ability to switch to another provider to avail of a more advantageous mortgage interest rate, I also indicated that greater clarity should be provided to customers on the possibility of switching provider and this option should be fully supported by all mortgage entities, including the existing mortgage creditor.
Further I supported the steps taken by the Central Bank to ensure that firms proactively deal with emerging difficulties for their customers since the increase in interest rates. The Central Bank requires firms to enhance the range of supports available to borrowers in or facing arrears and to have sufficient operational capacity to manage applications by borrowers to switch their mortgage or mortgage provider.
Arising from that meeting, on 6 September the Banking and Payments Federation of Ireland announced a number of further initiatives by the mortgage industry. This included:-
• a second phase of a ‘Dealing With Debt’ campaign to highlight new and existing supports for concerned mortgage customers;
• mortgage servicing firms and MABS to collaborate on an expansion of streamlined customer engagement framework; and
• the provision of initial eligibility criteria by the main lenders to provide clear guidelines for home mortgage customers of credit servicing firms who are seeking to switch their mortgage.
This means that, for the first time there is now an agreed industry wide set of initial eligibility criteria to facilitate people switching their mortgage from a non-bank to a bank.
The Central Bank has estimated that there are approximately 27,000 accounts currently with non-bank non-lenders that may potentially be able to switch but would be subject to an individual credit assessment by lenders and there are other criteria that will need to be considered.
Firms have enhanced borrower communications initiatives on switching and some have launched proactive outreach campaigns aimed at specific groups of borrowers.
The Central Bank’s analysis has also shown that there is no evidence of discrimination for switching applicants coming from non-banks based purely on where their mortgage is currently held.
The BPFI are actively engaging with banks regarding the number of customers switching their mortgage from a credit servicing firm to a bank. The banks are manually tracking this data and will share the data once it is available.
While measures taken by firms to date are welcome, I am also informed by the Central Bank that it will continue to engage with firms to ensure that actions meet its expectations and all industry participants are extending themselves to support consumers and support switching.
