New rules on breakage fees could see homeowners with mortgages switch without penalties.
Fianna Fáil TD for Donegal Charlie McConalogue is urging fixed rate mortgage holders to check with their lender to see if they can switch and get a better interest rate without being hit by large penalties.
A new EU rule – the Mortgage Credit Directive – has changed the way lenders calculate a breakage fee, which should reduce the large penalties which had been used by banks to keep customers with them.
Deputy McConalogue explained, “I have come across a number of cases recently where mortgage holders have been able to switch lender to avail of a better rate without having to pay a large penalty to their original provider. These are people who were on a relatively high interest rate and can now make major savings by switching to a variable or lower rate with their current provider or
by moving their homeloans to another provider.
“Fixed rate mortgage holders owe more than €14bn to lenders – some may have secured a competitive rate but many more are stuck on high rates of more than 4% or 5%. Under this new rule, they can break their current agreement and move to a better deal.
“Mortgage holders with high fixed rates should get in touch with their bank to find out if there is a charge associated with exiting the loan early. The Central Bank should also be making fixed rate mortgage holders aware of this new rule by undertaking a public awareness campaign”.