The Central Bank of Ireland plays a major role in the Irish mortgage industry, especially with the regulation that they provide to the mortgage business with their lending rules. More broadly, however, the Central Bank functions as the national bank of Ireland and provides the national government and commercial banking system with financial and banking services.
The Central Bank of Ireland manages and serves as the regulatory authority of monetary policy and currency in Ireland. Through regulation, the Central Bank of Ireland has a hand in many different industries and businesses.
So, what role does the Central Bank of Ireland play when it comes to mortgage switching?
Switching Made Easier
In 2019, the Central Bank of Ireland instituted several new measures to make mortgage switching easier for consumers and to regulate lenders. These six new measures work together to facilitate mortgage switching:
- Lenders must inform borrowers about cheaper options 60 days before the borrower is at the end of their fixed rate mortgage.
- Lenders have to inform borrowers if they can save money on their mortgage loan based on the equity of their home. Lenders must also advise borrowers each year about how to move to a less expensive mortgage based on the borrower’s loan-to-value.
- Lenders must help borrowers compare the current market for cheaper mortgage loans by providing new and existing customers with a link to the online mortgage comparison tool at the Competition and Consumer Protection Commission’s website.
- Lenders have to explain the pros and cons of various mortgage incentives.
- Lenders must provide borrowers with complete information as to how they can switch their mortgage.
- Lenders have to inform borrowers of a decision regarding their application within 10 business days of receiving the completed mortgage application.
Mortgage Switching and Ireland
So, why does the Central Bank want to make mortgage switching easier for consumers? The simple answer is that many people in Ireland do not take advantage of the cost savings that can be generated from mortgage switching.
The Central Bank of Ireland conducted research to identify why so few – less than 3% in the first half of 2019 – switch their mortgage. The Central Bank found three primary reasons at the root of why so many people don’t switch their mortgage. First, borrowers are unaware of how much mortgage switching could save them. Second, many borrowers find comparing different mortgages and lenders challenging. Third, many believe that the mortgage switching process is too long and complicated.
The Central Bank introduced their new mortgage switching measures to motivate a greater number of borrowers to switch their mortgage. The hope is that these measures will facilitate mortgage switching in Ireland and educate borrowers about the process.