Mortgage consumers benefit from (and need) advice

Consumers make better long-term decisions about mortgages after reading official advice on switching, according to new ESRI research. However, many mortgage-holders still do not understand basic aspects of how mortgage products work.

The ESRI’s Behavioural Research Unit conducted a controlled experiment funded by the Competition and Consumer Protection Commission (CCPC). In the experiment, a representative sample of mortgage-holders answered questions about how mortgages work and listed what they thought they would need to do if they wanted to switch. They also rated switching offers. Responses given before reading CCPC’s online advice were compared to responses given afterwards.

The results showed that mortgage-holders were initially drawn to high cashback offers that are ultimately more expensive. For instance, on average, consumers preferred €2,200 in cashback to a 0.4% better APR. Yet, for the average mortgage, this amounts to taking out a loan for €2,200 at 24% interest.

After reading the official advice, consumers placed much more weight on APR and the long-term savings they could make. They also became more confident about picking good deals. The experiment therefore supports new regulations introduced in 2019, which require lenders to direct consumers to this advice.

Unfortunately the experiment also revealed potentially serious misunderstandings. When asked what they would need to do to switch, just one third of mortgage-holders realised that they would need a solicitor and one quarter that they would need to have the property revalued – typically the two largest costs when switching. Furthermore, most consumers did not understand one or more basic aspects of mortgage products. Examples included how repayments relate to the cost and length of a mortgage, the implications of paying only interest, or the extent of debt liability.

“There are large gains to be had for many families by switching mortgages, so it is encouraging to see that reading official advice improves consumers’ decision-making and their confidence,” said Dr Shane Timmons of the ESRI’s Behavioural Research Unit. “Cashback can be useful, but in our experiment consumers placed too much weight on it until they read the advice. Generally, most people are better off securing long-term savings from a lower APR.”

Commenting on the research, Fergal O’Leary, Member of the Competition and Consumer Protection Commission, said, “For most consumers, taking out a mortgage is the largest financial commitment they will make. It is crucial therefore that they fully understand the terms and conditions as well as the full long-term cost of the mortgage they choose. The CCPC commissioned this research to better understand how consumers make decisions in the context of the different special offers and rates available in the mortgage market. The results provide valuable insights into consumer decision-making and we have refined the information we give to consumers as a result.

The research clearly shows that it is worthwhile to take some time to review the independent information, including the mortgage comparison tool, at This is the case for first time buyers but equally so for many consumers who could save on their mortgage by switching. Taking a few minutes to check can help consumers cut through the advertising material and allow them to get the best deal for their needs.”