Hayes welcomes Central Bank action on variable mortgages
Brian Hayes MEP today welcomed the news that the Central Bank of Ireland would introduce measures that require banks to inform their variable mortgage holders every year about alternative products on offer. These measures were communicated to Mr. Hayes in a letter from the Governor of the Central Bank, Philip Lane, following his calls for simpler switching procedures.
“It is welcome that the Central Bank is carrying out these measures to improve transparency of variable mortgage products. The Central Bank sees that mortgage switching is a vital tool to a well-functioning mortgage market and the more they can do to ensure consumers have the right information about better mortgage offers the better.
“This will be the first time that banks will have to communicate annually a summary of alternative products on offer and publish on its website its policy for setting variable mortgage rates. It is important that this information is communicated to people in a clear and understandable way. Otherwise, customers are often left in the dark about the benefits of switching mortgage products or provider.
“However, I do still believe that the Central Bank needs to develop a specific code of conduct on switching. And I also believe that the government needs to bring in standalone legislation to establish a simple switching procedure, similar to what was done in Italy.
“We must recognise that there is still a great lack of competition in the mortgage market. Variable mortgage rates are still too high. We need to find ways to ensure that foreign banks can come into our mortgage market and compete with the current market players. To develop that competition, I believe that switching must be a key component of our mortgage market. We currently have very low switching rates and this keeps the market less competitive.
“In Northern Ireland there is approximately one mortgage provider per 180,000 people. In Great Britain there is approximately one mortgage provider per 700,000 people. In the Republic of Ireland there is one mortgage provider per 920,000 people. This shows the dominance of the five main lenders in Ireland.
“I believe we need to stimulate a more competitive mortgage lending environment, particularly with a view to encouraging reasonably priced long-term fixed rate mortgage products. In most other Eurozone countries, you can get a long-term fixed mortgage rate of 15 or 20 years for less than 3.5%.
“In Ireland, only Bank of Ireland offers a 10 year fixed rate mortgage. Other than that, there is hardly any competition in the mortgage market beyond rates of a 5-year duration. There is a culture of variable borrowing in Ireland and this will only change if competitive long term rates are available.”