‘Weak’ regulator fails to ban cash-back deals
THE Central Bank has been accused of failing to protect mortgage holders after it brought in new rules for banks but failed to ban controversial mortgage cash-back offers.
Opponents of the incentives argue cash-backs are a device by lenders to avoid cutting interest rates.
Academic research has found consumers cannot properly assess these types of incentives and often make poor choices.
Bank of Ireland, EBS and Permanent TSB offer 2pc in cash back when someone signs up for a new mortgage or when they switch.
The Central Bank has now announced new measures to encourage mortgage holders to switch to a better deal.
But rather than banning cash-back deals, the Central Bank has told lenders to be much clearer in their adverts to ensure those taking out new mortgages and switchers understand the cost implications of taking out a mortgage with a cash-back offer.
The new rules issued by the regulator to encourage switching will force lenders to make a decision on all mortgage applications – both new and switcher – within 10 days. This applies once a completed application has been received.
Lenders will also have to tell consumers coming off a fixedrate mortgage the interest rate they will roll to, and set out other options.
Brendan Burgess, founder of Askaboutmoney.com, dismissed the changes as “weak” and said the Central Bank was failing consumers.