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

Mortgage holders ‘overestimate difficulty of switching and underestimate benefits’

Written by:
The City watchdog says there is a case for intervening to help mortgage customers who stay on their lender’s default rate rather than switch to a better deal.

The Financial Conduct Authority (FCA) made the conclusion following research it commissioned to better understand why borrowers don’t switch their mortgage.

It comes after estimates revealed around 800,000 consumers (10% of mortgage holders) do not switch deals at the end of their mortgage fix. This means they miss out on average savings of £1,000 per year in the first two years of the switch, and £100 a year thereafter (based on a competitive two-year deal).

The research revealed that mortgage holders typically overestimate the difficulties of switching while underestimating the benefits.

While switching barriers vary from person to person, the main factors include a lack of time, fear of the application process and because borrowers are content with their current lender or deal.

However, the research revealed that those who don’t switch are less likely to be vulnerable compared to the general population.

Typically, those failing to switch include older, wealthier males, while women who don’t switch tend to be in the younger age bracket. However, mortgage non-switchers do switch other financial products, such as insurance and energy.

Just two in five use a mortgage broker to switch and those who don’t cite ‘conflict of interest’ over commission for not wanting to use one.

Many borrowers also tend to focus on monthly outgoings and want to see monthly savings of at least £120 prompting them to switch.

The research, undertaken by Savanta: ComRes on behalf of the FCA, also found that understanding of the switch process is limited, and consumers are more likely to switch internally rather than look for a deal elsewhere.

As such, the FCA said there is a case for intervening to help mortgage customers who don’t switch and it will issue a consultation paper on potential remedies later this year.

It said effective remedies would need to engage consumers in the switching process, set out the case for switching and give borrowers enough of the right information so they’re not overwhelmed, causing them to disengage.

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.

Big flu jab price hikes this winter: Where’s cheapest if you can’t get a free vaccine?

Pharmacies, supermarkets and health retailers are starting to offer flu jabs ahead of the winter season, but t...

Is now the time to fix your energy deal?

Fixed energy tariffs all but disappeared during the energy crisis. But now they are back with an increasing nu...

Octopus steps in to buy Shell Energy – what customers need to know

The deal is expected to complete in the fourth quarter of 2023 and will take Octopus Energy’s retail supply ...

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.

The best student bank accounts in 2023: Cash offers, tastecards and 0% overdrafts

A number of banks are luring in new student customers with cold hard cash this year – while others are compe...

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?

Money Tips of the Week