Experts are split over the Government’s proposal to allow borrowers to switch mortgage provider in seven days.
Last week, the Government called for evidence to find out how long it took to switch provider across a number of markets, including mortgages.
The Government will meet with industry bodies in the coming months to discuss the plan, which is part of the incoming Digital Economy Bill, and the proposals could be in place by next year.
Business secretary Sajid Javid says: “I want to give consumers more power over switching providers for services they rely on to make sure they are getting the best deals. The Government is committed to creating a system that works for consumers and makes markets more competitive. I want to hear what consumers and businesses think of making switching quicker and more consistent across all markets.”
But commentators are split over whether this could work for mortgages. Council of Mortgage Lenders director general Paul Smee says: “We fully support the switching principles and our members have long recognised that speed – as well as cost and service – is frequently valued highly by remortgage customers.
“However, whether a seven-day target is realistic, given tasks that lenders need to complete to fulfil risk and regulatory requirements, depends on when the clock starts ticking.”
SPF Private Clients chief executive Mark Harris says: “While seven-day mortgage switching sounds attractive, the reality could be very different. Currently, the best-case scenario for switching mortgage is one month but it typically takes two months and could take as long as three months.
“If the borrower gets into the habit of switching their mortgage frequently, numerous credit checks could affect their credit rating”.
My Home Move group distribution director Dev Malle says: “In principle, we support the Government’s intentions behind this proposal. There are challenges but the concept will hopefully drive everyone to find solutions.”