Press Release 23 August 2010
- Tracker customers should be informed of switching implications -
Tá an preasráiteas seo ar fáil as gaeilge chomh maith
The Central Bank and Financial Regulator today published the findings of an examination of switching practices related to tracker mortgages by mortgage lenders and relevant customer communications. A number of concerns were identified during the examination about the level of disclosure and transparency when consumers moved from tracker rate mortgages to other forms of mortgages.
The Central Bank and Financial Regulator has written to all mortgage lenders detailing the findings from the examination and outlining a number of new measures to be introduced immediately to ensure consumers fully understand the implications of switching from a tracker mortgage. Issues identified are subject to separate supervisory engagement with individual firms.
The examination found that in some cases communication on the financial implications and consequences of switching were not fully transparent to the customer and that it was not always clear that if a customer moved from a tracker rate mortgage to an alternative interest rate (fixed, variable or other rate), for any reason, that their agreed tracker rate or an alternative tracker rate might not be available again in the future.
As a result of this finding mortgage lenders have been requested to fully disclose the impact of any switch from a tracker mortgage rate in all customer communications, with immediate effect. Customers must be notified that switching from a tracker rate may mean they will lose the ability to avail of a tracker rate mortgage in the future, where this is the case.
Mortgage lenders have been advised to include new information in all customer communications regarding switches from tracker rate mortgages, for any reason, with immediate effect:
- Indicative comparisons of the cost of monthly repayments of the customer’s current tracker rate mortgage and the rates being offered; and
- Details of the advantages and disadvantages of both the tracker mortgage rate compared to the other rates being offered.
The examination did not find any evidence that customers were being offered incentives to move off tracker rate mortgages but mortgage lenders have been instructed to give careful consideration before offering any incentives to customers to move from tracker rate mortgages and to notify us in advance of any such proposals.
It was noted that one mortgage lender provides for a cooling off period for customers who have switched mortgages. The Central Bank and Financial Regulator is considering the use of a cooling off period as part of the review of the Consumer Protection Code. The Consumer Protection Code is currently under review and it is expected that a consultation paper will be issued on the Code later this year.