Why don't more borrowers switch mortgage provider?

Hard to see why SVR customers don't make more of an effort to secure better rates by (1) moving to LTV based offering with existing provider (subject to positive equity), (2) choose cheaper fixed rates now on offer (available option, even for those in negative equity), or switch to alternative provider offering rates at 3.5% compared to highest SVR offered by some banks at 4.5%. I assume legal costs are a factor but if you can save 1% plus per annum, why not vote with feet? It seems existing providers will offer better rates to retain custom anyway...so as previous comments say, help yourselves instead of depending on political masters to make a difference.
 
I assume legal costs are a factor but if you can save 1% plus per annum, why not vote with feet?.

Most lenders in the switcher market will cover most (if not all) of the legal costs associated with switching, together with free valuations and other incentives, such as free home insurance.
 
KBC certainly appear to have relatively strict underwriting criteria, which presumably explains why they can offer the lowest variable rates in the market.

Have you tried any other lenders? For example, Ulster Bank have a fairly decent switcher offering for relatively low LTV borrowers.

Yes - PTSB offered us enough to switch, but right now I'm waiting to see what happens with Noonan's July deadline...
 
Yes - PTSB offered us enough to switch, but right now I'm waiting to see what happens with Noonan's July deadline...

The PTSB switcher offering is fairly reasonable at low LTVs - <50% LTV @ 3.76% APR variable; <60% LTV @ 3.87% APR variable; <70% LTV @ 3.97% APR variable . PTSB will make a contribution of €1,000 towards the costs of switching.

However, I think the Ulster Bank three-year fixed rate offering (fixed until 31/08/2018) for <60% LTV @ 3.65% is more attractive, particularly as Ulster Bank will make a payment of €1,500 which should more than cover all switching costs.

I really wouldn't anticipate any major changes to the variable rate market arising out of the Minister's chat with the banks.
 
Will PTSB offer these LTV rates to customers already with an SVR in the bank who would switch to a fixed rate for a better rate? We pay 4.5% on our SVR and would qualify for 3.87% on that fixed LTV offering.
 
Will PTSB offer these LTV rates to customers already with an SVR in the bank who would switch to a fixed rate for a better rate? We pay 4.5% on our SVR and would qualify for 3.87% on that fixed LTV offering.


I'm sure they would (and they certainly should) if they thought that such a valuable customer (from PTSB's perspective) was about to cross the road to another lender!

If I was in your position, with an LTV of <60%, I would look for approval in principle from KBC and Ulster Bank and then request PTSB to match their offers - if PTSB won't match the best competing offer, then switch. Banks no longer reward loyalty.

Also, depending on the principal amount outstanding on your mortgage, Bank of Ireland might be worth considering. A three-year fixed rate mortgage with BofI, at an LTV of <75%, is currently 3.85% - not the best fixed rate available on the market but Bank of Ireland will pay 1% off your mortgage balance. So if you have a relatively large outstanding mortgage, albeit with a low LTV, and you want to fund a short term expense (such as a family holiday), then BofI might be the way to go.

Assuming your LTI is not too high, there is really no reason why you should be paying a 4.5% SVR. You could save yourself thousands, if not tens of thousands, of Euro over the medium to long term by switching mortgage provider (or at least threatening to do so).
 
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Thanks Sarenco. Unfortunately we would not meet lending criteria of a new lender due to one of us no longer in employment. For this reason, it would make a big difference to us if we could avail of a lower rate in the same bank.
We did ask PTSB about 6 months ago and were refused. They said these rates were for new business only and would not apply to existing SVR customers.
 
I doubt any lender would offer an existing borrower a lower rate unless they felt under some competitive pressure to do so.

I'd keep an eye on developments though - it looks like Ulster Bank are prepared to let existing variable rate borrowers switch to lower fixed rate mortgages. To be honest, I'm not sure what's in it for UB but PTSB and other lenders may well follow suit.

Does your outstanding loan amount exceed 3.5 times your gross household income? If not, I still think it would be worth approaching other lenders about a possible switch.
 
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Yes - PTSB offered us enough to switch, but right now I'm waiting to see what happens with Noonan's July deadline...
Nothing wrong with this, but the process of applying takes time also. You dont need to decide what you are going onto until much closer to the time. With KBC I had 2 months to accept the Letter of Offer, and this was after we got to that stage in the process. There is no harm in commencing the process now and seeing how far you get with the 3 main options - PTSB, Ulster and KBC - all of which offer incentives to move. You can add BOI to the list if you have a decent mortgage and the 1% clawback is financially worthwhile to you over a 2 year payback window
 
Nothing wrong with this, but the process of applying takes time also. You dont need to decide what you are going onto until much closer to the time. With KBC I had 2 months to accept the Letter of Offer, and this was after we got to that stage in the process. There is no harm in commencing the process now and seeing how far you get with the 3 main options - PTSB, Ulster and KBC - all of which offer incentives to move. You can add BOI to the list if you have a decent mortgage and the 1% clawback is financially worthwhile to you over a 2 year payback window

That's useful information gnf.

Could you give us an estimate as to how long the process took from your first contact with KBC to drawdown? Also, did you learn anything from the process that you would do differently if you were to refinance now? Finally, did you arrange everything yourself or did you go through a broker?

Sorry for all the questions:)
 
Could you give us an estimate as to how long the process took from your first contact with KBC to drawdown? Also, did you learn anything from the process that you would do differently if you were to refinance now? Finally, did you arrange everything yourself or did you go through a broker?

@Sarenco I have no issue in answering questions on this. I will set up a different post on it over the next few days and include a blog type thing of what happened at each step along the way.

In my particular case, there was a few complexities which slowed things down. House was in my name only as it was brought the week before we got married; KBC wanted joint mortgage/joint ownership for the family home. My wife has a house bought before we got married in negative equity, but on a low tracker mortgage. I am also self employed (independent IT consultant) which adds a little bit extra in the paperwork required. We also have two children in full time childcare due to start school in 2017 & 2018 respectively.


For me, it was 4 months from first contact to drawdown, although this could be done in 2 months except for complexity on self employed status in February (requiring lots of additional documentation to be issued and confusion on the banks side on what proof of employment meant) and BOI title deeds getting lost in early March and contract issue joint names on property issue in late March/early April. I assume most would not have the same issues.

Things I would do differently:
- Would have applied to a number of banks at the same time and got to Approval in Principle stage. At that point I would have asked they for their standard mortgage contract documentation for review, just in case there would be items in it I would not be too happy with. That said, I am used to reading contracts so it would be a bit easier for me
- Arrange for title deeds to be returned from bank once Approval in Principle has been received. It speeds up the entire process. The cost of ~60 euro is a bit like a valuation cost - needs to be done to move it forward

I did not go through a broker. I went into KBC hub and done it all with one of the people there. It was an easy enough process. That said I done the same for my original mortgage with BOI

Note: I also cancelled by credit card with BOI and moved that to KBC, and opened a current account with KBC as part of the process. I still have my BOI current account for the moment at least, but there are minimal transactions going through it at this stage (~3 a month currently)

Also worth noting that KBC are giving me 1,000 euro switcher rebate back off the first mortgage payment - so on 1st June I will pay 1000 less than normal. This might be useful for people wondering about cashflow issues.
The 1000 euro rebate did NOT cover the legal costs of the move for me. I have yet to get the final bill, but will be closer to 1600 euro + 127 for the valuation. That said I got 230 off my house insurance for the year, so net cost me ~ 500 euro to switch. Also note I did NOT use the solicitor as for the original house purchase.
 
Many thanks for your detailed response gnf - that's really helpful. If you could find the time to pen a "how to" type post that would be fantastic.

On your legal costs, I can certainly see how transferring the property jointly to yourself and your wife, coupled with the fact that you used a new solicitor (who presumably had to read the title from scratch), would have added materially to your legal costs. Even allowing for that, I wonder how long it will take for you to recoup your net costs - I suspect you will make it back in a couple of months.
 
The Sunday Business Post reports today that, based on recently published IBF data, mortgage switches quadrupled in the first three months of 2015 compared to the similar period in 2014. However, the amounts involved are tiny - only €41 million out of the near €1 billion in mortgages drawn down in the quarter were switcher mortgages.

Hi Sarenco

Unfortunately, I don't think that the figures are even that high.

The Central Bank is due to report some research on switching this week, which I believe will show the rate of switching to be 30 per month. ( I couldn't find the article you refer to or the IBF data but I suspect it could be approvals.)

30 mortgages at around €250k each would be €20 million a quarter.

The CB estimates that 15,000 borrowers could recover their costs of switching in one year.

Brendan
 
A big reason for not switching omitted from the first post, is that many mortgages are just too small and have only a few years left.

If you have a Bank of Ireland mortgage with a balance of €50k and you are paying 4.5%, you might find it hard to get mortgage approval for such a low amount. Let's say you switch to KBC at 3.5%, you will be saving €500 a year.

You would be better off asking BoI for a rate cut and they will probably cut the variable rate for you.

Or they may suggest that you fix at 3.6%. It would make more sense to fix at 3.6% than pay €1,000 to move. (Not sure what the minimum mortgage is to qualify for the contribution towards legal fees from KBC and Ulster.)

Brendan
 
A big reason for not switching omitted from the first post, is that many mortgages are just too small and have only a few years left
So is it true to say that the two main reasons are (a) arrears/bad credit rating locking a borrower to their current lender and (b) mortgage too small or too little left on term to bother?
Are there any indicative numbers on these two groups compared to the total PPR variable rate numbers?
(Not sure what the minimum mortgage is to qualify for the contribution towards legal fees from KBC and Ulster.)
€40K with UB: [broken link removed]
Can't see anything obvious on KBC site.
 
So is it true to say that the two main reasons are (a) arrears/bad credit rating locking a borrower to their current lender and (b) mortgage too small or too little left on term to bother?

I don't think we can say the relative size of each factor. I would have thought that Negative Equity or LTV >80%/90% were bigger factors.

Brendan
 
Only 60 people a month are switching mortgages at present!

Extracted from [broken link removed]


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In 2005, there was a huge saving to be made. People were switching from SVR mortgages to trackers. They had certainty about the benefit of switching - they knew that it would be a long term saving over the life of the mortgage. And, of course, Danske and BoSI were aggressively chasing market share.
 
Personally I am not changing because

1) I am on a low enough rate 3.9%
2) I am an accidental(ish) landlord so can write off 75% of interest
3) My outstanding mortgage is <90k
4) Legal costs make it not worth while
 
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