Seven-day mortgage switching on horizon
In the most ambitious proposals announced in the Queen’s Speech last week, ministers are keen to extend seven-day current account switching to most services including mobile unlocking, which should save consumers £48m a year in charges.
Business secretary Sajid Javid acknowledged that many consumers fear that changing some services is too cumbersome and difficult. But, mortgage providers will be asked to offer the same standard of service that banks must offer those who change their current accounts.
Instead of the four to eight weeks it usually takes to change mortgages, like current account holders, customers could be guaranteed that all changes complete within seven working days, with the bank liable for any errors.
Plunging mortgage rates have encouraged more borrowers to switch lender. The latest Bank of England figures show that rates in March fell to the lowest level since records began in 2004.
Javid told The Times that fixed-rate mortgages come with early repayment penalties, making a seven-day switch more complicated, but added that he wants the service to be offered within a year.
Mark Harris, chief executive of mortgage broker SPF Private Clients, said: “Under the proposals, not only will borrowers be relying on lenders to process the case in seven days, the bank will also require a valuation of the property to be carried out. This will be less of an issue on lower loan-to-values as AVMs (automated valuation models) are available. The latter would have to become more commonplace in order to make a seven-day switch achievable.
“If the borrower gets into the habit of switching their mortgage frequently because it is easier to do so, then numerous credit checks could affect their credit rating, subsequently damaging their long-term prospects.”
He added: “This idea has been around for current accounts for a while and hasn’t exactly led to the breakup of the current account oligopoly we have today. It could have a similarly limited impact on the mortgage market, particularly when you consider that there are many people paying more than they need to on their lender’s standard variable rate because of a general apathy towards remortgaging, particularly when interest rates are so low.”