125,000 mortgage holders ‘afraid’ to look for better rate
THOUSANDS of mortgage customers are overpaying because they are “afraid” to apply to get lower rates.
In some cases, lower interest rates on home loans are available by simply filling out a form.
Customers of Permanent TSB, KBC and Bank of Ireland could all avail of lower rates but are not asking for them.
Brendan Burgess, of the Fair Rates Campaign, said people had a “fear” of dealing with financial institutions. Some 125,000 customers in the three banks are affected.
Some 45,000 Permanent TSB customers are overpaying for their mortgages.
Permanent TSB boss Jeremy Masding told an Oireachtas committee only one in three variable rate customers had applied for a reduced rate offered by the bank.
Customers could get reductions of up to 0.8pc on the interest rate but have not applied to get lower rates.
They just have to apply to the bank to have a valuation done and seek a managed variable rate (MVR) – this is a rate based on the equity in the home. The more equity they have, the lower the rate they pay.
“The range of reductions is from 0.2pc to 0.8pc, depending on the LTV (loan to value). We sent a free valuation voucher in 2015 and again in 2016. All they have to do is sign the form and send it back,” the bank told the TDs and senators.
The bank’s standard variable rate is one of the highest in the market, at 4.5pc.
A cut of 0.8pc would see someone save €140 a month on a €300,000 mortgage over 30 years. Over a year, this works out at a reduction of €1,680.
Under questioning from Fianna Fáil’s Michael McGrath, Permanent TSB was unable to answer why the take-up of the offer was so poor. Mr McGrath told the Finance committee: “So 45,000 customers who are paying 4.5pc could get a reduction. It applies to those in negative equity as well. Why is the uptake so poor?”
Mr Masding replied: “We wrote to them in 2015 and 2016.”
McGrath replied: “Only onethird of those who are entitled to a reduction have applied.
“It’s extraordinary and hard to understand.”
There is no time limit on the offer, and Permanent TSB is again to write to affected customers inviting them to apply for the managed variable rate.
KBC Bank revealed to the Oireachtas committee that just 4pc of its mortgage customers have taken up an offer that gives them a 0.2pc discount on their mortgage rate if they open a current account.
This means 40,300 customers are missing out on reductions worth €420 a year on a €300,000 mortgage. The bank’s variable rate is 4.25pc.
Some 40,500 Bank of Ireland customers are also paying a variable rate of 4.5pc when they could get a fixed rate as low as 3pc, for a monthly saving of €256 on a €300,000 mortgage, research by Mr Burgess revealed.
He urged mortgage customers to take up the offers. “It costs nothing. There is no downside,” he said.
He said legislation should be introduced to ensure banks pass on any cuts in variable or fixed rates to all customers.
“Banks should not be exploiting people’s fear of dealing with financial institutions. We would not allow them to exploit illiterate people, so why allow them to exploit people who are not financially astute?” he asked.
Permanent TSB also confirmed up to 32 people lost their homes due to losing a tracker mortgage.
The bank had originally said 22 people lost homes due to the tracker overcharging.
Politicians were told €50,000 in compensation was given to people who lost homes, and €25,000 given to those that lost investment properties.
The bank also told the committee up to 2,000 mortgage holders in deep arrears were likely to avail of a mortgageto-rent scheme it is working on with a “preferred partner”.