The main Irish bank and non-bank lenders have agreed a new set of criteria designed to provide clear guidance to mortgage holders whose loans are managed by credit servicing on how they could potentially switch their loan to another provider.
The criteria lay out agreed requirements that borrowers whose mortgages are with credit servicers would have to meet, in order to be able to transfer to a bank or non-bank to avail of lower rates.
It is estimated that around 80,000 mortgages are currently managed by credit servicing agents on behalf of investment funds.
As many as 30,000 of those customers are not in a position to move their loans because of their poor credit history.
Because credit servicing firms do not in the main offer fixed rate mortgages, it means that these customers have seen the interest rates on their mostly variable rate loans sky-rocket over the last year, in some cases to as high as 10%.
The development of the criteria is backed by the main credit servicing firms, as well as Brokers Ireland and the Association of Mortgage Advisors.
Among the requirements agreed by the lenders are that customers would need to be making full capital and interest repayments on their mortgages.
In addition, customers must have no arrears on their home mortgage or any other lending in the past two years.
The Banking and Payments Federation Ireland (BPFI), which has been central to the co-ordination, said once customers meet these and other initial criteria, their applications to switch will be assessed on a case-by-case basis in line with individual lender credit policy.
BPFI has published an information leaflet which outlines the various elements of the agreed initial criteria that will be taken into account during the switching application process.
“While we acknowledge not all customers will be eligible to switch due to their individual circumstances, our key objective today is to provide clarity on the initial required criteria to switch,” said Brian Hayes, BPFI’s chief executive.
Brian Hayes, the CEO of BPFI
“If customers of Credit Servicing Firms wish to explore their switching options, we encourage them to consider their individual circumstances against the initial eligibility criteria and, if they feel they meet them, to contact our retail banking members via their dedicated phonelines to discuss their options further,” he said.
As part of the second phase of its Dealing With Debt campaign, the BPFI also said credit servicing firms and the Money Advice and Budgeting Service (MABS) have collaborated to expand a streamlined customers engagement framework.
The aim of this is to accelerate the agreement of sustainable repayment plans for customers who are in financial difficulty, BPFI said.
Credit servicing firm Pepper Advantage Ireland has already successfully implemented the plan.
It includes bi-weekly forums with MABS regional offices to discuss individual cases and affordable solutions for customers struggling to meet mortgage repayments.
It also involves an escalation process for cases which are particularly sensitive.
The latest phase of the campaign has also seen AIB, Bank of Ireland and Permanent TSB put in place dedicated phone numbers with specialist support teams for customers of credit servicing firms who wish to discuss switching options.
Avant Money, Finance Ireland and ICS Mortgages also have teams in place to deal with any queries from customers looking to switch.
“The principal aim of our campaign is to make sure that anyone who is worried or struggling with their mortgage or other loan repayments knows there is help available from their provider including a wide range of short and long-term repayment solutions which can be tailored to each borrower’s circumstances,” said Mr Hayes.
“It is important to emphasise that this applies to those who may already have missed a repayment as well as to those customers whose payments are fully up to date but feeling under financial pressure,” he stated.
“Our key message today is that the most important thing you can do is to contact your mortgage lender or financial services provider as soon as possible or indeed a trusted third party such as MABS among others,” he added.
The developments have been welcomed by the Association of Irish Mortgage Advisors (AIMA) and Brokers Ireland.
“It has been clear for some time that there is a need for customers of credit servicing firms to be offered greater assistance when switching mortgage providers,” said Trevor Grant, Chairperson of AIMA.
“This has been particularly relevant for the past 12 months or so as we have seen a significant increase in variable and tracker mortgage rates.”
“The new eligibility criteria agreed by mainstream mortgage lenders should give many of these customers the opportunity to switch to more affordable mortgages.”
“However, there will inevitably be some customers who will be disappointed that they fall outside the scope of the criteria for switching – and cannot therefore switch to a mainstream lender.”
Rachel McGovern, Director of Financial Services at Brokers Ireland said the earlier a mortgage holder in in difficulty seeks help the better, because the outcome is likely to be more favourable.
“If you are paying some of the highest rates of interest, and if you have been in arrears you may be able to switch to one of the pillar lenders if you meet certain criteria,” she said.
She added that it was a positive development to see credit servicing firms working with MABS to accelerate the agreement of sustainable repayment plans.