Is this realistic?
The government are considering ways to make switching your mortgage as easy as switching your bank account. Whilst most are quicker, some mortgages can take up to three months to transfer to a new provider, leading to government officials believing consumers are missing out on saving money. Would this be a good result for homeowners?
This does not constitute advice and advice should be sought in all instances before acting on it.
Your property may be at risk should you be unable to maintain any agreed mortgage payments over the term agreed.
A switching culture
We are already deemed to have a switching culture these days with most people shopping around for the best phone contract, energy provider, bank account and mortgage.
However, the government hope to speed up the process of “switching” even further.
“I want to give consumers more power over switching providers for the services they rely on, to make sure they are getting the best deals” Sajid Javid, Business Secretary
There is already a 7-day switching service for bank accounts, and there is now a consultation happening to potentially extend this to mortgages.
Is this realistic for mortgage lenders?
Whilst the intention is good, switching a mortgage is more in-depth than switching a bank account, and this point has already been raised by critics.
The detailed affordability checks required on a mortgage application, along with things like property surveys are what typically slow down the process.
The Council for Mortgage Lenders (CML) have demonstrated their support for faster switching, whilst also questioning if one-week would be practical, given the tasks required of lenders to meet risk and regulatory criteria.
“Whether a 7-day target is realistic, given tasks that lenders need to complete to fulfil risk and regulatory requirements depends on when the clock starts ticking”. Paul Smee, CML
How could this negatively affect the cost of mortgages?
Market experts have pointed out that if customers start moving mortgages as frequently as they do credit-cards, it could make mortgages more expensive in the long-term.
Lenders price their mortgage packages, partly, on the probable longevity of the customer.
If there is therefore a higher percentage of customers frequently switching to new providers with better deals, early repayment fees, as well as mortgage pricing, could be forced upwards.
It could also have an affect on a customers’s credit rating.
Need a speedy mortgage service? Speak with Chris
If you would like us to undertake a review of your current mortgage deal or you are thinking of purchasing in the near future and require funding, please contact Chris for a free, no obligation appraisal.
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