Industry slams seven-day switching in IMLA survey

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Government plans to bring in seven-day mortgage switching are almost definitely doomed to fail, according to a survey by the Intermediary Mortgage Lenders Association.

However, the IMLA report says the remortgage market will still prosper without large reforms.

Four-fifths (81 per cent) of lenders and two-thirds (66 per cent) of brokers said that the plans to help customers remortgage within a week are unlikely to work.

The research also says that few within the industry feel the proposed changes to mortgage switching are a good idea.

Among lenders, 59 per cent believe that seven-day switching is a bad idea and just 22 per cent believe it is positive.

Brokers are slightly less cynical about whether consumers will benefit from the potential reform.

But two-fifths (41 per cent) say the proposals are a bad idea, with just a third (33 per cent) saying they are welcome.

The industry listed several reasons for seven-day switching not being viable.

Seventy-eight per cent of lenders said getting valuations would be impossible in the timeframe.

Meanwhile, 70 per cent risk and regulatory and 44 per cent said affordability checks will take too long.

Brokers  singled out fulfilling risk and regulatory requirements as the main issue (78 per cent), followed by automated valuation models being inaccurate (37 per cent).

The Department for Business, Innovation and Skills  announced in May that it was looking to shorten the time it takes consumers to switch between mortgage deals to just seven days, and launched a consultation into the process.

IMLA’s research also shows that lenders and brokers both see remortgaging as the area of the market that has the best future potential for growth for the rest of 2016.

A total of 59 per cent of lenders and 43 per cent of brokers predicted the remortgage market would pick up pace in H2 2016, overtaking the first-time buyer market.

IMLA executive director Peter Williams says: “These findings show that the industry is clearly sceptical about the chances of the seven-day switching scheme being implemented effectively in the mortgage market, and whether it will indeed benefit consumers.

“The continued strength of lending would certainly suggest that consumers are not shy in coming forwards to remortgage under the current rules of engagement, which aren’t standing in the way of favourable rates and strong competition. “

Williams adds that the industry thinks that a move towards seven-day switching would not be responsible lending.

He says:  “While consumers may benefit from being able to switch a bank account or broadband provider in a short timeframe, the fact is that a mortgage is a much more significant purchase.

“It is important that the lending process makes adequate checks to support positive consumer outcomes, and it should therefore not be rushed.”