Central Bank Mortgage Switching Research Report April 2017

 

“New rules may make switching mortgages easier

 

Above taken from Irish Independent article 

 

 

Key Findings from Report

Full report at the end of the post.

Consumers see mortgage switching as a significant undertaking

• 44% of all mortgage holders surveyed felt that the switching process would be too complex, while 27% of those who switched mortgage found no obstacles to the process.
• 38% of those surveyed who switched their mortgage reported that a reduction in the amount of paperwork/documentation required for the mortgage switching process would improve the process.
• 36% of those surveyed who switched their mortgage reported that they had to chase their lender to be kept informed during the mortgage switching process.
• 25% of those surveyed who considered switching but did not, felt that it would take too much time and effort.
• 12% of those surveyed who considered switching but did not, felt that they would not meet the affordability criteria, and 12% of those surveyed who considered switching but did not, were unhappy with the level of personal information required.
• The qualitative research revealed that, for many participants, choosing the original mortgage was bound up in a period of complexity and angst and consequently many would be reluctant to enter the mortgage process again. The steps and stages involved in getting their first mortgage were seen as costly, uncertain, onerous and stressful.

Consumers see mortgage switching as costly

• 37% of those surveyed who switched their mortgage said that there were additional processing fees that they were unaware of. The qualitative research also highlighted that consumers felt that there was a lack of transparent information on the actual cost of switching and that lenders should highlight these costs and potential savings to be made e.g. cost of legal fees and charges that might be levied by the surrendering lender.
• 26% of those surveyed who switched their mortgage reported that a lower cost process would be an improvement.
• 33% of those surveyed who considered switching but did not, reported that a lower cost process would encourage them to switch.

Consumers who switched their mortgage had a positive experience

• 81% of mortgage holders surveyed who switched their mortgage agreed that they understood what was going on at each stage of the process.
• 27% of mortgage holders surveyed who switched mortgage lender reported no obstacles to switching their mortgage.

Consumers said that they might consider switching if they could be certain that they would make a saving over the lifetime of the mortgage

• 54% of all mortgage holders surveyed agreed that they might switch if there was a long-term guarantee of an interest rate saving. This figure rose to 77% amongst mortgage holders surveyed who considered switching but did not switch.
• 42% of mortgage holders surveyed who had never switched, said that lower interest rates would encourage them to switch.
• 52% of mortgage holders surveyed were uncertain about the amount of money that could be saved by switching, and the qualitative research revealed that the true extent of potential savings over the lifetime of the mortgage needs to be highlighted to encourage switching.
• The qualitative research identified the unknown cost of switching, the unknown cost of legal fees and the unknown charges potentially levied by the original lender as key reasons for not switching mortgage.
• The qualitative research also revealed that consumers are not aware of the savings that can be made by switching their mortgage and that the true cost of switching and potential savings to be made needs to be clearly highlighted for potential switchers.

Lower interest rates were given as the main reason for switching mortgage lender

• 4% of all mortgage holders surveyed had switched their existing mortgage to a new lender, of which, 53% switched to benefit from lower interest rates/monthly repayments.
• Of the 6% of mortgage holders who changed their existing mortgage product with the same lender, 59% said that moving house or making home improvements was the main reason.

Easy comparison of mortgage products is a key step in the mortgage switching process

• 32% of mortgage holders surveyed who switched their mortgage disagreed that it was easy to compare mortgages from different lenders, and 30% of those surveyed who switched mortgages disagreed that mortgage products were simple to understand.
• 37% of mortgage holders surveyed who switched their mortgage reported that a website to compare the offers of all mortgage lenders would have made the switching experience smoother.
• 34% of mortgage holders surveyed who considered switching but did not, reported that a website to compare the offers of all mortgage lenders would encourage them to switch.
• 31% of mortgage holders surveyed said they were aware of the CCPC’s consumer help website (at www.consumerhelp.ie), 11% had visited this website and 6% had used the mortgage comparison tool. The qualitative research also highlighted that there was a lack of awareness of the CCPC website amongst consumers but there was a very high level of interest when they were made aware of it.

The views amongst some of those working in the area of mortgage switching indicate that mortgage switching is seen as a complicated process

• It was reported that the legal process was complex and slow, as well as delays with the lenders providing redemption figures, loan packs and title deeds.
• It was reported that the volume of paperwork was onerous and that digital copies of documents should be acceptable.

Mortgage holders had real concerns about approaching their mortgage lender regarding switching

• 27% of all mortgage holders surveyed said they had concerns about approaching their mortgage lender about switching.
• 27% of all mortgage holders surveyed said they had concerns about how negative equity would be handled.
• 27% of all mortgage holders surveyed said they had a general fear of not wanting to do anything that might jeopardise their home.
• 22% of all mortgage holders surveyed said they had a general fear of not wanting to do anything that might jeopardise their credit rating.

A single point of contact or a dedicated switching team would encourage and assist with the mortgage switching process

• The majority of consumers who participated in the focus groups stressed that having a single point of contact throughout the switching process would be invaluable.
• Some of those working in the area of mortgage lending surveyed, and focus group participants suggested that dedicated switching teams in branches to provide information and walk consumers through the process may stimulate switching.

Improvements to the specified timelines around the mortgage switching process are needed

• 28% of mortgage holders surveyed who switched mortgage lender reported delays with the legal process as an obstacle in the switching process. The qualitative research highlighted that the legal process was complex and slow.
• 19% of those surveyed who switched mortgage lender reported delays with the new mortgage lender approving the mortgage application as an obstacle in the switching process.
• 28% of mortgage holders surveyed who considered switching but did not, said that a less time consuming process would encourage them to switch.
• 27% of mortgage holders surveyed who have switched their mortgage, reported that a less time consuming process would be an improvement.

 

 

Full details on Central Bank Mortgage switching report: Central Bank Mortgage Switching Research Report April 2017