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Mortgage holders leaving thousands of euro on the table by failing to switch home loan providers – CBI research

Mortgage holders are leaving thousands of euro on the table by
failing to switch home loan providers, according to new research by the
Central Bank of Ireland (CBI).

Three
in five eligible mortgages could save more than €1,000 in the first
year after switching to a cheaper lender and more than €10,000 over the
remaining term of the loan, the research found.

Yet fewer than
3pc of borrowers switched providers in the second half of 2019,
suggesting there are significant barriers to moving easily from one
lender to another.

The findings were published today in a new economic letter from the CBI that included a detailed review of switching activity in the Irish mortgage market.

The report’s authors found that, although switching activity among
private dwelling home (PDH) borrowers had increased, the number of
mortgage switchers is still low relative to the pool of those eligible.

They said the low
appetite among borrowers to move to a cheaper mortgage persisted
despite falling interest rates and policy initiatives designed to help
switching.

Instead, eligible
borrowers tended to stay with their lenders, even though 72pc could
save up to one-tenth of their annual repayment costs if they moved to a
cheaper provider.

The researchers
found that first-time buyers and those with mortgages dating from the
peak years of the housing bubble were the least likely to take advantage
of better deals. They suggested that low levels of financial literacy
and education could be factors behind the inertia.

Irish banks have
on average some of the highest mortgage interest rates in the eurozone,
although prices have been falling in line with loose monetary policy
from the European Central Bank.

The research classified an eligible borrower as someone with a performing mortgage and no arrears on a variable rate mortgage or a fixed rate product with less than 12 months remaining on the term. The outstanding balance had to be at least €30,000 and the loan-to-value ratio below 90pc.

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