The industry clearly believes reducing mortgage switching to just seven days is incompatible with responsible lending
The Government’s plans for seven-day mortgage switching aim to give consumers easier access to the best deals and follow similar moves in the current account market.
While it is good to see the Government trying to improve customer outcomes, recent research we conducted revealed industry scepticism about the proposal’s necessity and feasibility.Indeed, 81 per cent of lenders we asked did not think it could be implemented effectively and 59 per cent said it was a bad idea.
Latest Q3 figures from the Council of Mortgage Lenders show the remortgage market has grown by 41 per cent compared to the same period last year. Our own research reveals 59 per cent of lenders and 43 per cent of brokers believe remortgaging is the area of the market with the best prospect for growth. This suggests there is an active switching market and the current process is not preventing borrowers from remortgaging.
While reducing the time taken to switch to other products or lenders is not without value, mortgages are the biggest purchase most consumers make and should therefore be treated differently from bank accounts. Mortgages require complex risk and regulatory assessments in order to protect borrowers and 78 per cent of lenders doubt these could be carried out effectively within a week.
Safeguarding the consumer should be policymakers’ main concern, so it is disconcerting to see them potentially jeopardise this in the name of efficiency. The industry clearly believes reducing mortgage switching to such a short window is incompatible with responsible lending practices.
Given that remortgaging is already on the rise, and given the potential risks related to valuation and other assessments, policymakers risk undermining a robust and proven system in order to solve a largely non-existent problem.
Peter Williams is executive director of Imla