ANY further effort by the Central Bank to keep interest rates artificially high should be seen as anti-consumer, according to the fee-based mortgage advisers, REA Mortgage Services, which is also highly critical of the cost of mortgage finance in Ireland.
"The profit margin on mortgage lending here is already double that of Britain and three times higher than in the US," Mr Richard Eberle told Family Money last week. "The cost of money in the British money markets is higher than it is here, yet mortgages are cheaper." For the Central Bank to keep interest rates up because of a perceived risk of higher inflation - at a time when inflation is actually still falling - "is inherently unfair and anti-consumer", says Mr Eberle who adds that every half a percentage point cut in interest rates amounts to £50 million in savings to Irish mortgage holders.
In a recent comparison study of British, US and Irish mortgage rates, the company found that the risks associated with domestic mortgage lending - which are assumed to be higher than those of, commercial lending - are not as great here as in Britain or the US where proportionately more homeowners default on their loans.
Yet the interest risk margin charged by lenders here - 1.56 per cent - is higher than the risk margin charged by Britain lenders (1.06 per cent) and US lenders (0.89 per cent). "Based on these premiums Irish mortgage lenders are overcharging their customers by £60 to £80 million per annum," says Mr Eberle.
Meanwhile, REA Mortgage Services has brought out a new service to help borrowers secure the lowest interest rate possible from their existing lender.
For a flat fee of £95, the company will do a "Mortgage Health-Check" to show a client exactly what rate they are paying, the lowest available currently rate from their lender and the immediate and long-term savings that could be achieved by securing that lowest rate.
"The idea behind the health check, which we will not undertake unless the final outcome is a savings of at least five times the value of the fee, "is to provide the customer with enough information to demand the lowest available rate from the lender," says Mr Eberle.
"This lowest rate is most likely to be the one offered to new, first-time buyers who, we believe, are being unfairly subsidised by existing ones. Why should a brand-new mortgage borrower, who may very well be a higher risk, be treated to a better interest rate than an existing customer who has an established repayment record?"
If the lender declines to offer the client a better rate, the option is to switch to a new lender who will offer better value. The cost of offering the independent mortgage advice and conveyancing is a flat flee of £500 (the fee is the same for first-time buyers). Any broker's commission payable (usually between a half and 1 per cent of the value of the mortgage) is offset against that fee and any other charges since REA work strictly on a non-commission basis.
Where a lender does not pay a refundable commission, the cost of moving the mortgage can be added to the new loan. Either way, REA will not undertake a switch unless there are sufficient savings over the life of the contract to justify their fee.
REA Mortgage Services can be reached at 52 Lower Leeson Street, Tel. (01) 676 1595.
