Mortgage holders can save €10k by moving lender, says Central Bank
MORE than 100,000 people on expensive variable rate mortgages could make huge savings by switching to a lender with a lower rate, the Central Bank has said.
More switching would force banks to cut variable rates.
People are put off switching because they think the process will be costly and are overwhelmed by the complexity of the information.
But the collective savings to those on high variable rates could amount to €65m in the first year alone, a Central Bank study found.
It calculated that 26,000 people could reduce what they are paying for their mortgages by around €1,000 in the first 12 months after making the move to another provider.
Roughly 27,000 homeowners would save €10,000 over the lifetime of their mortgage, says the study entitled Switch and Save in the Irish Mortgage Market.
The research found that 21pc of the 522,407 mortgage accounts it looked at would be cheaper if they moved. This works out at close to 110,000 mortgages.
It costs around €1,200 in legal fees to move a mortgage, but most banks cover this cost.
The new academic paper says an active switching market would mean lower mortgage rates "through the promotion of healthy competition between existing players".
It says large numbers of those on variables are unable to switch lender because they are in arrears, are in negative equity or have very little left to pay.
People on trackers would not benefit from moving to a new mortgage lender.
Only 38 homeowners a month are switching at the five main banks, the research found. There are a number of reasons for this, including that banks may match an offer when a mortgage holder threatens to switch.
Other factors putting people off switching include a misplaced perception that there will be a large cost to the homeowner.
Potential switchers struggle to absorb the complexity of the information on different mortgage options, the report says.