Thousands of homeowners are facing the tide of rising interest rates because debt-laden banks are too slow to process their mortgage transfer requests.
The central bank has no plans to subject the banks to their task even though the delay is a breach of its consumer law.
It now takes up to four months to complete the transfer. The reason is the backlog of borrowers who rush to move to a lower-cost provider before the mortgage rate rises.
Any delay would leave borrowers at great risk of losing interest rates currently on offer.
Banks lend at the rate at the time the mortgage is withdrawn, not the rate displayed at the beginning of the process.
This shouldn’t be much of a problem because mortgage approval in principle is required within 10 days under the central bank’s Consumer Protection Act, the rulebook for how regulated companies treat consumers.
But brokers say it takes 22 to 36 days to get approval in principle for switching machine customers.
Brokers have reported significant frustration with service levels from banks and other lenders regarding handling mortgage keys.
For most banks and lenders, it takes four months or more to complete a transfer, said Alison Veron, managing director of Switcheroo Mortgages.
Thousands of borrowers with variable and fixed rates are rushing to keep the current low fixed rates as long as they can afford the repairs.
Some started getting out of fixed prices early and even trackers to avoid spiraling price hikes.
comes after the European Central Bank ( European Central Bank) has raised its prime lending rate by 1.25% in the past few months, with warnings of more to come.
Borrowers can still get five-year fixed rates at 2.5%.
However, there are concerns that these rates will soon rise much higher.
If the five-year fixed rate rises to 3.5%, this means that the borrower will end up paying an additional 130 euros per month to secure the five-year rate.
Over the course of a year, this will cost an additional 1,560 euros to repay. This is based on a mortgage of €250,000, for a term of 25 years, with an 80% loan-to-value ratio.
Martina Hennessy of brokerage Doddl.ie urged banks and other lenders to respect the rates that were approved because it takes too long to complete lending deals, leaving borrowers vulnerable to much higher rates.
Asked what it was doing about the poor response time in completing the switch, the central bank did not indicate in its response that it had taken any measures to compel banks and other lenders to improve their service levels to switchers or get them to respect lower rates.
The central bank said mortgage providers are required to inform customers of their decision on a mortgage application within 10 working days. If not, the customers should be informed of the reasons for the delay.
Regardless of the central bank’s rule on the decision of the initial mortgage application, it is a commercial matter for mortgage lenders how long the rest of the application process takes.
The Central Bank expects that the quality of service provided to clients by companies matches their expectations and internal service level standards of companies and that all financial companies take a consumer-centric approach and communicate clearly, effectively and in a timely manner with all clients,” the regulator said.