Banks and non-bank lenders have agreed a new set of eligibility criteria which would make it easier for customers of credit servicing firms to switch their mortgage to another provider, the Banking and Payments Federation Ireland (BPFI) has announced.
Credit servicing firms are employed by owners of the loan to deal with the borrower on their behalf.
This move comes following calls from Finance Minister Michael McGrath last week for the banks to show support to mortgage-holders who are finding themselves in difficulty following numerous interest rate hikes from the European Central Bank over the last year.
The three pillar banks — AIB, Bank of Ireland, and Permanent TSB — along with Avant Money, Finance Ireland and ICS Mortgages have agreed to the initial criteria.
The BPFI said credit servicing firms have committed to working with these criteria to support customers switching and to ensure they are aware they may have options to switch their mortgage.
To be eligible to switch under these guidelines, customers need to be making full capital and interest repayments on their mortgage. Customers must also be able to demonstrate they have sustainable income which is adequate to repay the mortgage in full over the lifetime of the loan.
In addition, customers must have no arrears on their home mortgage or any other lending in the past two years. Applications will be assessed on a case-by-case basis in line with individual lender credit policy.
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.
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.
"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.
