It’s tempting to rename the Central Bank of Ireland ‘Central Blank’. When it comes to consumer protection, the central bank has proven to be flawed. It fires blanks.
n a time when home loan interest rates are skyrocketing, banks and non-banks alike are taking a while to process mortgage swaps and admit first-time home loan buyers.
Bankers won’t lose too much sleep over this. If it takes up to four months to complete the switch or for new buyers to come together to draw down the mortgage loans, borrowers will lose, but lenders will gain as mortgage rates rise. So lenders will benefit from their own inefficiency.
This is exactly why the central bank should step in and crack the whip.
At the Dublin docks, where the Central Bank is headquartered, is there any real understanding of the financial chaos that is in store for homeowners?
The cost crisis has prompted thousands of people with adjustable rates, some with expensive trackers, those nearing the end of fixed rates and others anxiously trying to pay off their first mortgage, to try and hold on to the relatively attractive rates that we have at the moment.
Prices of just over 2pc are available in the market.
This has led to a backlog of borrowers switching to a cheaper provider ahead of rising mortgage rates.
Tracker interest rates have risen automatically since July due to the two interest rate hikes by the European Central Bank.
The three largest banks here have yet to reassess their variable interest rates, but increases in variable rates are inevitable from Bank of Ireland, AIB and its offshoots EBS and Haven, and Permanent TSB.
Some of the non-bank lenders have increased their variable rates while already increasing their new fixed rates.
The Oireachtas Finance Committee should bring in the central bank mandarins to explain why they are failing in their duty of consumer protection
We’re still waiting for the main banks to hike new fixed interest rates, but inevitably they will. That means anxious times for those in the process of switching and new buyers waiting to claim their money.
Banks lend at the rate at the time a mortgage is drawn, not at the rate offered at the beginning of the process.
With delays of up to four months from application to actual draw, thousands of homeowners and prospective homeowners fear they will be caught in a spike in interest rates because overwhelmed banks are slow to process their applications.
If a five-year fixed rate went up to 3.5 percent, a borrower would end up paying an additional $130 per month to secure the five-year interest rate.
Over a year this would cost an additional €1,560 in repayments. This is based on a €250,000 mortgage with a term of 25 years and a loan to value of 80%.
Under Central Bank rules, mortgage lenders generally have 10 days to issue mortgage approvals. Brokers say it takes 22 to 36 days to get approval in principle for switcher customers.
When asked about the delays, the central bank’s response is anything but reassuring. It has no plans to hold mortgage providers accountable for their poor performance in approving and completing mortgages.
Delays are a commercial matter for mortgage lenders, regulator says.
Here, too, the central bank gives consumer protection a low priority.
It really should force lenders to respect the mortgage rates given at the approval-in-principle stage if they can’t pull themselves together in time.
And it could be an idea for Oireachtas’ finance committee to call the “Central Blank” mandarin to see why they are failing in their job of protecting consumers.
https://www.independent.ie/opinion/comment/why-isnt-the-central-bank-doing-more-to-protect-mortgage-switchers-and-borrowers-from-costly-bank-delays-42011120.html Why isn’t the central bank doing more to protect mortgage lenders and borrowers from costly bank delays?