Almost half of mortgage holders did not not compare offers despite differences in interest payments, according to research by the Economic and Social Research Institute (ESRI).
The think tank’s Behavioural Research Unit (BRU) found that people rely on personal recommendations or go to a bank they already use when applying for financial products.
This is despite better value offers for bank accounts, credit cards, loans or mortgages usually being available elsewhere, it said.
The research, commissioned by the Department of Finance, surveyed a national sample of almost 3,000 consumers, providing an account of consumer behaviour in retail financial services.
It found that 73 per cent of consumers did not shop around when choosing their bank account, with that figure at 68 per cent for those looking for loans and 74 per cent in relation to people looking for credit cards.
In relation to mortgages, the ESRI said 46 per cent did not compare offers – despite differences in interest payments worth up to tens of thousands of euro.
The research indicates that once consumers have these financial products, the majority do not consider switching to better value ones.
Respondents cited difficulty comparing offers, the cost, the time, uncertainty about the process and worries about making a mistake.
The same consumers who compare offers when initially purchasing financial products are also more likely to switch in future – with the research indicating the main motive being to save money.
“Consumers could make substantial gains by choosing better value financial products, but many feel unable to do so,” Professor Pete Lunn, head of the BRU, said.
“In the next stage of this research programme, we are using the study findings to design digital tools to help people to understand the market better and to feel confident enough to shop around for better deals.”
Minister for Finance Michael McGrath said he hoped the findings would encourage mortgage holders in particular to look around for better offers in the context of rising interest rates.
“The findings of this report are clear, consumers can make considerable savings by actively comparing a range of commonly used financial products,” he said.
“Given recent interest rate increases, mortgage holders in particular have a strong incentive to look at potentially better value options and I hope the findings will encourage many to do so.
“The report gives a very useful insight into the reasons why some people stick with existing financial product providers despite the potential savings which switching offers. Financial institutions have a duty to make costs and features of their products clear and accessible.
“As Minister for Finance I will be giving my full support to measures that can be undertaken to make the switching process as attractive and seamless for consumers as possible.”
The Department of Finance is running a ‘Switch Your Bank’ campaign as part of a range of competition measures agreed with the European Commission to raise awareness and promote customer switching in the retail financial product area.
This was agreed in the context of the EU restructuring plans for AIB and Permanent TSB, which is funded by the two banks.
