Brendan Burgess
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Lenders do exploit consumer ignorance on this topic. The last time I checked there is something like a third of outstanding mortgages on variable rates. I would guess most of these have rolled onto a variable after expiry of a fixed rate, or were on a variable and simply don't realise that fixe d rates have been lower for most of the last decade. Unless there is a restructure, these customers could move tomorrow to a fixed rate and save money. There is tens or maybe hundreds of millions of euros in annual savings out there - that's a lot of money!The CCPC recommends that a revised Consumer Protection Code should mandate mortgage providers to offer the same rate or equivalent best rate to a consumer at the end of an initial fixed term. The Central Bank should also consider the differentials between offers made to new and existing customers and their appropriateness or otherwise.
The CCPC recommends that a revised Consumer Protection Code should mandate mortgage providers to offer the same rate or equivalent best rate to a consumer at the end of an initial fixed term.
automatically putting consumers onto the best possible fixed rate on expiry of the previous one.
You would then have the issue of some customers being hit with a break fee if they switched providers, which you could argue would be unfair since they didn't explicitly opt in to re-fixing.automatically putting consumers onto the best possible fixed rate on expiry of the previous one
Research by the Central Bank has found that only a third of mortgage holders who were offered a cheaper lending rate took up the offer.
This was despite the fact that they could have saved €490 in the first year, and €5,400 on average overall.
Those who have missed payments in the past are among the least likely to react of offers of better rates from their lender.
“This shows that a negative experience can reduce engagement with borrowers over other mortgage decisions.,” Mr Devine wrote.
And then the most important point is thrown in as an afterthought:
The Central Bank should also consider the differentials between offers made to new and existing customers and their appropriateness or otherwise.
Exactly.You would then have the issue of some customers being hit with a break fee if they switched providers, which you could argue would be unfair since they didn't explicitly opt in to re-fixing.
But I think that the situation with mortgage cashback is significantly different from the case of two providers, e.g., mobile phone or insurance companies, having different prices for broadly similar plans.Discriminating between new and existing customers is common in any market you can think of. The CBI has banned it in insurance for reasons that make no sense to me and it would be a pity if the mortgage market went down the same route.
It's a sad but unavoidable fact that most consumers at most times are not very discerning or savvy. I include myself in this. When I was time rich and cash poor I spent a lot of time hunting down the best price. Now I'm the opposite and I don't haggle or do market research nearly as much.
That additional cost to the consumer may, considering the long-term nature and high value of many mortgages, be significant.
Discriminating between new and existing customers is common in any market you can think of.
The CBI has banned it in insurance for reasons that make no sense to me and it would be a pity if the mortgage market went down the same route.
Customer inertia is a huge reason for our lack of development of competition, not just in banking, but in health insurance and other financial products.Lenders do exploit consumer ignorance on this topic. The last time I checked there is something like a third of outstanding mortgages on variable rates. I would guess most of these have rolled onto a variable after expiry of a fixed rate, or were on a variable and simply don't realise that fixe d rates have been lower for most of the last decade. Unless there is a restructure, these customers could move tomorrow to a fixed rate and save money. There is tens or maybe hundreds of millions of euros in annual savings out there - that's a lot of money!
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