MOST CONSUMERS ARE missing out on chances to save money when it comes to financial products and services, according to a survey conducted by the Economic and Social Research Institute (ESRI).
The survey, which was commissioned by the Department of Finance, consulted almost 3,000 consumers from across the country and found that the majority do not shop around for the best value offer or consider switching once they’ve signed up.
People opening bank accounts and applying for loans, mortgages or credit cards are more likely to rely on personal recommendations than to shop around for the best deal, the ESRI said in a statement.
“When choosing their bank account, 73% of consumers did not shop around. The figure was 68% for loans and 74% for credit cards,” the statement read.
That number is lower for people applying for mortgages but the survey still still found that 46% of people did not compare offers from other banks even though different interest rates were available.
The survey also found that consumers are generally unlikely to switch banks, not out of loyalty, but due to a lack of certainty regarding financial products.
“Once consumers have these financial products, the majority do not consider switching to better value ones. Switching rates across the four products ranged from 6-17% over five years,” the statement read.
That 6-17% figure is likely even lower, however, because the research was conducted while two banks – KBC and Ulster Bank – were leaving the Irish market, which caused more people to make a switch.
“Most people are aware that switching is an option but cite difficulty comparing offers, costs, time, uncertainty about the process and worries about making a mistake,” the ESRI statement said.
“People are just not shopping around as much as they could and it’s costing them a lot of money,” said Professor Pete Lunn, Head of the Behavioural Research Unit at the ESRI.
“Consumers could make substantial gains by choosing better value financial products, but many feel unable to do so,” he said.
Following the completion of the research phases of the Switch Your Bank campaign, which aims to equip consumers with the information they need to find the best deals, the ESRI intends to introduce new “digital tools” sometime next year.
In the meantime though, Lunn says that if people are not comfortable or familiar with the markets for these products, there are existing resources available to them.
“Make use of the tools that are available now,” he says, recommending CCPC.ie (Competition and Consumer Protection Commission), a product comparison site.
“The banks have to lodge details of their products there, so you can compare credit cards, loans, mortgages and bank accounts on that site. It’s very good. It makes you realise how much money you can save if you use it.”
“Most of the time, if you’re looking for a personal loan, the most expensive ones on the market can be up to twice as much as the cheapest,” he says. “If you’re looking at a €10,000 loan over three years, the difference in cost is going to be about a grand.”
When it comes to mortgage prices in particular, Trevor Grant, chairperson of the Association of Irish Mortgage Advisors said:
“For first-time buyers, given the backdrop of rising interest rates, it has never been more important to ensure they get the best mortgage deal they can at the outset. You can substantially reduce the cost of your mortgage by shopping around lenders or by seeking guidance from a mortgage broker to ensure you get the best deal.
“It is important for all mortgage holders to understand that their lender will only advise them on the products they have to offer and not what is available in the market.”
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