More than 50,000 mortgage holders could switch to banks offering lower rates, new data shows

More than 50,000 borrowers whose mortgages are stuck in investment funds could potentially switch to banks offering lower rates, new data from the Central Bank shows.

The data, which was released to Sinn Féin’s finance spokesman Pearse Doherty, shows how some 22,000 borrowers whose loans are owned by the funds have never been in financial difficulties.

A further 32,000 have “previously experienced” financial difficulties.

The 54,000 borrowers are out of a total of 80,032 accounts held by non-bank non-lenders (NBNLs) – who don’t originate loans – and whose rates have shot up in line with recent interest rate increases by the European Central Bank (ECB).

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It added another 0.25 per cent to baseline rates this week – its ninth increase in 12 months.

The Central Bank of Ireland (CBI) told Mr Doherty that the figures “represent the upper limit number of NBNL borrowers who may be in a position to look for an alternative mortgage provider”.

Mr Doherty said lenders now have a “moral responsibility” to purchase the loans from so-called vulture funds

In comments to The Irish Times, Minister for Finance Michael McGrath upped the pressure on lenders to accept switchers.

“This will not be a solution for everyone, but the switching levels generally – and especially from non-banks to banks – is far too low,” he said. “I believe these mortgage holders should be welcomed back by the banks subject to the normal rigorous underwriting process.”

[ Banks told to ‘work in spirit of co-operation’ with hard-pressed borrowers in wake of rate hikes ]

Mr Doherty said that it is “clear that the retail banks and Central Bank must act to free households from the clutches of vulture funds”.

“Banks should never have sold these loans. They have a moral responsibility to purchase these mortgage loans and provide a clear pathway for these borrowers to re-enter the mainstream mortgage market.”

Mr McGrath said he has engaged with the Central Bank and financial institutions on this issue and emphasised these points, and called for “clearer and more visible public messaging” to borrowers about a pathway out of the non-bank sector.

In its letter to Mr Doherty, the CBI said the lenders’ own criteria may restrict their appetite to offer switching deals to these customers – with a view among political sources that there is very little appetite for the business among high-street lenders.

Brian Hayes, chief executive of Banking & Payments Federation Ireland (BPFI), insisted that “all lenders in the Irish market are open to switching”.

He said the industry is working to “highlight the potential of switching, especially against the backdrop of cost-of-living pressures”.

A spokeswoman for the Central Bank said it has ensured banks have “operational capacity” to manage applications from switchers and that there is “no discrimination against borrowers based on who their current lender is”.

[ The Irish Times view on rising interest rates: more pressure on borrowers ]

The CBI said credit criteria play a role in the borrower’s ability to switch.

Its statement added that, subject to credit underwriting criteria, it has emphasised to lenders it wants capacity in the system for more borrowers to switch used “to the maximum possible extent”.

Sinn Féin also said the onus is on the Government to provide mortgage interest relief to support households amid the rise in interest rates and the issue of borrowers whose loans are with NBNLs.

Speaking in Cork, Tánaiste Micheál Martin acknowledged the pressure mortgage-holders are under but said the Government has tried to deal with cost-of-living increases “more generally”.

Mr Martin added: “There was a view some years back that mortgage interest relief wasn’t the most effective or targeted way of dealing with the issue.”

He said: “In the round we will look at cost of living in combination with the budget in the autumn and see what we can do to alleviate [the situation] for people under particular pressures.”