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.”