MORTGAGE CUSTOMERS WHO wish to switch lenders in a bid to save money or avoid interest rate hikes are facing delays of several weeks due to a huge surge in applications and the loss of two key lenders from the market, brokers have said.
One customer who spoke to The Journal started the switching process with his broker in July this year and still has not received a loan offer from the new lender. He and his wife are currently on a fixed rate, and are hoping to move to another four-year fixed rate.
“We’re worried about the rates increasing, that’s why we’re trying to get this locked in as soon as possible, it seems as if they might be delaying so they can increase the rates, to be honest,” he said.
“If our rate ends up jumping to 4%, that’s going to be a significant increase in our monthly outgoings, all of our budgeting at the moment is based on being able to stay on a fixed rate for the next few years.
“I was told that this isn’t a risky loan for the bank, it’s 1.5 times our salaries and that’s nothing for a bank in the grand scheme of things.”
He and his wife have been asked to submit fresh bank statements and payslips several times since their initial application due to the lender’s processing backlog, he said.
“We were dropped to the back of the queue again, even though the reason we were putting in new documentation was because they’d let the time lapse without giving us an offer. It’s really frustrating,” he said.
Trevor Grant, chairperson of the broker representative body the Association of Irish Mortgage Advisors (AIMA), said he is seeing the impact of the delays “on a daily basis” at his own brokerage.
“When it comes to the phenomenon of switching mortgages, until around 12 months ago, even though it made loads of sense, traditionally people just didn’t do it,” he said.
“In the last 12 months there has been a surge in the number of people, obviously there’s a lot of talk about interest rates, people are more aware of it and they’re very concerned that their mortgage rates will go up, it’s their single biggest financial commitment.”
In August, the Banking and Payments Federation Ireland (BPFI) reported that the volume of non-purchase mortgage activity, which includes switching and top-ups, grew by 126.5% year-on-year.
Grant said another major contributing factor to the delays experienced by customers wishing to switch providers is the exit of two major lenders – KBC and Ulster Bank – from the Irish market.
“They were known for low-cost, fixed-rate products so they would have been a home for many switchers and at their peak they accounted for 25% of mortgages,” he explained. “Losing them and then having that massive surge in applications as well has created a huge bottle-neck.”
He said the continuation of remote working, although it has been a positive move for many workplaces, including those in banking and financial sectors, has also created “unnecessary delays”.
“By nature, mortgages are very paper based and process-driven, so that means the process has become elongated,” he said.
Grant said the timeframe for approval now ranges from five working days to up to 25 working days, if all of the customer’s documentation is in order.
“If you have queries it can drag on forever, you get into a process of answering queries only for them to come back with more, but even if you’ve provided everything as it should be now it can take up to 20 or 25 days in some cases,” he said.
Although he acknowledged that many lenders have been recruiting additional staff so they can better meet the demand, he expressed concern about the potentially short deadlines customers may be given to draw down their mortgages if a bank decides to hike interest rates.
He said this had already happened in the case of one lender recently, which, after announcing a rate increase, had given customers with existing mortgage applications just five days to proceed to the draw-down stage to secure their original lower rate.
Grant said feedback from brokers suggests the vast majority of applicants were unable to meet this deadline and will now potentially face reassessment to see if they still qualify at the new rates based on affordability.
“They’ve got to give time for people to close, it’s taken longer for them to get approved in the first place – and those delays are not the fault of the customers in most cases – so if they’re approved they should be given time so they can get the money at the rate promised,” he said.
“It’s hard to get a mortgage and buy a house in this country. If you signed a contract and paid your deposit and then the lender, who may be the only one willing to give you the money, suddenly tells you that you don’t qualify anymore, that’s a huge shock.”
He said in some cases customers may lose their deposit if their mortgage funding falls through, as not all contracts have a clause protecting the deposit.
The Journal asked a number of banks about their current timelines for customers applying to switch over their mortgages.
Bank of Ireland said it is in line with the Central Bank’s Consumer Protection Code, which states that approval should be given within ten days of customers having all of their required legal documentation and paperwork in order and accepted by the bank.
Permanent TSB said the time it takes for a customer to go from approval in principle to drawdown of the funds is “dependent on the individual circumstances of each customer, including whether if the customer’s valuer and solicitor have completed their work”.
“Once all of these elements are in place, offer and drawdown can be completed very quickly and the bank is not currently experiencing any delays with this stage of the process,” the bank said.
“Given a rise in the volume of switcher applications we are currently strengthening the team to continue to meet the higher demand.”
A spokesperson for AIB said the bank works closely with customers to bring them through the process in “a speedy manner” and the timeframes differ depending on individual circumstances.
“Due to unprecedented demand, some customers may experience delays within our Haven broker channel and we are working to bring this timeframe in line,” they said. “We consistently keep our resourcing under review with an aim to support our existing and potential new customers.
Savings from switching
Earlier this week Daftmortgages.ie, a broker that is part of the Daft.ie property website, advised mortgage-holders not to be discouraged by the perceived “hassle” of switching lender.
The site reported that data from its personalised savings reports indicated 87% of mortgage holders would save an average of €90 on their repayments from month 1 if they switched mortgage now.
It said the average saving by switching and fixing interest rates now is just over €8,900 over the next 4 years for current mortgage holders.
In a survey conducted by the site, 40% of mortgage holders said they haven’t considered switching because of the effort involved with switching. A further 24% of mortgage customers believe that being on a fixed rate is a blocker to switching.
However Paul Monahan, general manager at Daftmortgages.ie, said customers who are currently on fixed rates should still enquire about a switch.
“At the moment, most customers breaking their fixed rate mortgage are not being charged a break fee,” he explained.
“I’d advise any customer on a fixed rate mortgage to call their lender and ask how much it would cost them to break — it’s definitely free just to find out. Given that interest rates are rising, almost every fixed or variable rate mortgage holder will benefit from taking a new fixed rate now and locking in today’s mortgage rates that start at around 2%.”
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