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Room to improve: a review of switching activity in the Irish mortgage market

Author

Listed:
  • Byrne, Shane

    (Central Bank of Ireland)

  • Devine, Kenneth

    (Central Bank of Ireland)

  • McCarthy, Yvonne

    (Central Bank of Ireland)

Abstract

In this Letter, we provide a detailed review of switching in the Irish mortgage market and identify the potential for savings among mortgage holders. Our estimates show that three in every five ‘eligible’ mortgages for principal dwelling homes stand to save over €1,000 within the first year if they switch, and more than €10,000 over their remaining term. We find that just 2.9 per cent of mortgages switched provider during H2 2019. Our analysis points to a range of explanations for mortgage switching inertia. A significant proportion of mortgage holders report a lack of knowledge or worry about the prospect of switching, in addition, gender, education, financial literacy and behavioural characteristics can help explain the degree of reported inhibition towards switching. This highlights the relevance of behavioural insights in informing consumer policy design.

Suggested Citation

  • Byrne, Shane & Devine, Kenneth & McCarthy, Yvonne, 2020. "Room to improve: a review of switching activity in the Irish mortgage market," Economic Letters 12/EL/20, Central Bank of Ireland.
    • Handle: RePEc:cbi:ecolet:12/el/20
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    File URL: https://www.centralbank.ie/docs/default-source/publications/economic-letters/economic-letter-12-mortgage-switching.pdf?sfvrsn=8
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    Cited by:

    1. McGowan, Féidhlim & Papadopoulos, Alexandros & Lunn, Pete, 2023. "Who switches and why? A diagnostic survey of retail financial services in Ireland," Papers WP748, Economic and Social Research Institute (ESRI).
    2. Devine, Kenneth, 2022. "Refinancing Inertia in the Irish Mortgage Market," Research Technical Papers 5/RT/22, Central Bank of Ireland.
    3. Beere, Brendan & Byrne, Shane & Kelly, Jane & Pratap Singh, Anuj, 2022. "The Great Account Migration: Lessons from Behavioural Economics," Financial Stability Notes 13/FS/22, Central Bank of Ireland.
    4. Byrne, Shane & Devine, Kenneth & McCarthy, Yvonne, 2022. "Interrupting inertia: evidence from a mortgage refinancing field trial," Economic Letters 9/EL/22, Central Bank of Ireland.
    5. Scott, David & Pratap Singh, Anuj, 2024. "Mortgage switching through the turning of the interest rate cycle," Financial Stability Notes 2/FS/24, Central Bank of Ireland.
    6. Papadopoulos, Alexandros & McGowan, Féidhlim & McGinnity, Frances & Timmons, Shane & Lunn, Pete, 2023. "Switching activity in retail financial markets in Ireland," Research Series, Economic and Social Research Institute (ESRI), number RS161.

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