You are here: Home - Mortgages - Remortgage - News -

Inactive borrowers should be contacted one year after being on SVR

Written by: Owain Thomas
The Financial Conduct Authority (FCA) is proposing that inactive borrowers who have been on a lender’s reversion rate for a year should be contacted about the options of switching to a different product.

The regulator said it wanted to make it easier for less active consumers who have been on a reversion rate, such as a Standard Variable Rate (SVR), for an extended period of time to switch products with their existing lender, if it was in their interests to do so.

However, it recognised that in some cases there may not be a suitable replacement product available from the current lender.

In its report, the FCA noted that one way to solve the problem of inactive borrowers might be to ask lenders to contact affected customers a year or so after moving onto a reversion rate “giving them a simple and straightforward means of moving to a cheaper mortgage”.

However, a remedy of this kind would need to take into account pre-contractual disclosure requirements, in particular those mandated by the Mortgage Credit Directive, as well as other relevant rules.

“We would also need to consider whether any communication encouraging customers to switch should contain additional information about the risks and benefits of doing so,” the FCA continued.

“We welcome ideas from lenders, intermediaries and consumer groups about proportionate and effective ways of engaging with these consumers.

It added: “What would be an effective alternative where no suitable product is offered by the customer’s existing lender?” and asked if respondents had any views on how affected consumers could be offered a better deal.

Improving strategies

The FCA acknowledged that lenders’ retention strategies and intermediaries’ contact strategies were developing as more lenders were paying retention procuration fees, which itself might lead to more existing borrowers being encouraged to switch.

It also suggested brokers could play a key role in innovation to engage consumers throughout the mortgage lifecycle and give them early sight of which products they qualify for.

“For example, a lender (or, perhaps longer term, an intermediary) with access to a customer’s mortgage account could better understand the extent of any overpayments and eligibility for a new deal, enabling them to tailor the timing and content of that customer contact,” the regulator said.

“Indeed, playing data back to consumers on a regular basis might be an effective means of educating consumers on amortisation, the features of their mortgage, and the points at which they might consider switching.”

There are 0 Comment(s)

If you wish to comment without signing in, click your cursor in the top box and tick the 'Sign in as a guest' box at the bottom.

Autumn Statement: Everything you need to know at a glance

Yesterday Chancellor Jeremy Hunt made his first fiscal statement in the role, outlining a range of tax measure...

End of Help to Buy: 10 alternatives for first-time buyers

The deadline for Help to Buy Equity Loan applications passed on 31 October. If you’re a first-time buyer who...

Moving to an energy prepayment meter: Everything you need to know

As households struggle with the soaring cost of energy, tens of thousands of billpayers are expected to move o...

What will happen if rates change

How your finances will be impacted by a rise in interest rates.

Regular Savings Calculator

Small regular contributions can build up nicely over time.

Online Savings Calculator

Work out how your online savings can build over time.

DIY investors: 10 common mistakes to avoid

For those without the help and experience of an adviser, here are 10 common DIY investor mistakes to avoid.

Mortgage down-valuations: Tips to avoid pulling out of a house sale

Down-valuations are on the rise. So, what does it mean for home buyers, and what can you do?

Five tips for surviving a bear market mauling

The S&P 500 has slipped into bear market territory and for UK investors, the FTSE 250 is also on the edge. Her...

Money Tips of the Week