We have commented several times since last year that the trend for mortgage rates in 2015 will be to see them drop. With spreads of c. 300bp’s on lending it makes it one of the reliably profitable sectors of banking given the stringent underwriting being applied.

With the Central Bank looking to curtail first time buyers but doing nothing about incumbent borrowers getting restricted it means that they have directed the market towards refinancing.

This is because one of the niches left on the table is that of existing variable rate holders, which banks will now try to tempt away from one another in an effort to grow market share.

There are many who cannot take part and below is a list of the mortgage holders who won’t benefit.

1. Those in negative equity, they are going to be stuck when it comes to refinance, they can trade up with a negative equity mortgage but they won’t be able to ‘switch’.
2. Those on fixed rates which accounts for in the region of 50,000 mortgage accounts, they face break penalties, and only people with a very short length of time remaining on these rates have an economic break fee.
3. People with tracker mortgages, the nearly 400,000 people on trackers have no reason to change nor will they, their margins are amongst the best in the world.
4. People who have missed payments, their credit is wreaked, even one missed mortgage payment is likely to unhinge a new application.
5. People who don’t meet the criteria. It is an interesting aspect of lending, that you could be current on a loan, but not qualify for the same loan elsewhere. This means to find out if you can switch you have to speak to somebody, either a broker or the lender you have identified.

What comes with a market like this? More offers directed towards refinancing, so it comes as no surprise that one bank kept its €1,000 towards switching contribution and another has just joined them. Expect more in this general space.

The other thing that will occur is that banks who stayed out of certain distribution channels will return to them so it should be no surprise if the likes of Ulsterbank (and Bank of Ireland once the troika ban on using brokers ends) return to using brokers.