‘It’s a case of if you can’t switch, tough’ – Central Bank accused of doing ‘nothing meaningful’ for mortgage holders

Founder of Askaboutmoney.com, Brendan Burgess said the regulator could have done far more to ­encourage mortgage switching and should have banned practices that keep home-loan interest rates high.

He was commenting after the Central Bank published an update of its rules around protecting consumers.

The Consumer Protection Code 2025 comes into effect next year, replacing a 2012 version of the regulations designed to safeguard the interests of consumers.

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One of the requirements under the new code will be that lenders will have to provide customers with a personalised saving estimate for each mortgage refinancing option. This is to help make mortgage switching easier.

But Mr Burgess said the updating of the code was a missed opportunity to go further with measures that would have brought mortgage rates down.

He wanted the Central Bank to do more to deal with the high cost of switching, and wanted the regulator to stop banks confusing consumers with cash-back offers that lead them to pay higher interest rates over time.

“It would have been very easy for the Central Bank to encourage competition between lenders on mortgage rates alone by banning cash-backs and other gimmicks, by banning the discrimination between new and existing borrowers, and by requiring vulture funds to make available to borrowers the same rates on offer from the lender who sold them the mortgage,” he said.

“Yet the Central Bank has done nothing meaningful to protect any of these customers.”

Mr Burgess said he had nine hours of meetings in the Central Bank with other consumer stakeholders discussing the new consumer code.

He claimed the Central Bank message to mortgage holders is now “it’s all right for lenders to gouge you as long as they tell you once a year what rate they are charging you. And if you can’t switch, tough”.

Mr Burgess said Bank of Ireland made €1.9bn in profits last year and AIB made €2.35bn.

“Most of this was due to the margin between what they paid depositors – virtually zero – and what they charged mortgage holders,” he said.

He claimed it was “just extraordinary how little the Central Bank will do to help Irish mortgage holders”.

Banks and other lenders are already required to explain to consumers the pros and cons of incentives such as cash-back offers.

But Mr Burgess wants cash-backs banned outright, as he says mortgage rates would be lower without them.

Asked why there are so few ­changes in the latest Consumer Protection Code, Central Bank governor Gabriel Makhlouf said the focus of the Central Bank of Ireland was on modernising the code for the digital age.

The old code dates back to 2012 when there was little digital technology used to sell and deliver financial products and services to consumers.

The bank said the code “reflects the way financial services are provided in a digital world”.

Mr Makhlouf denied the regulator is putting less emphasis on its consumer protection function despite recently disbanding its consumer protection division.

He insisted it is not downgrading its activities and is instead redistributing staff to other divisions.

Mr Makhlouf said the regulator now has a “more holistic” approach to consumer protection.

Last year the Irish Independent revealed the Central Bank disbanded its consumer protection division from the start of this year. The director of the unit has moved to another job and will not be replaced.

The updated code follows a review of consumer protections in this country carried out by the Organisation for Economic Co-operation and Development (OECD) last year.