Mortgages  

CML raises concern on effects of remortgaging

The director general of the Council of Mortgage Lenders welcomed rising levels of remortgaging which were up 8.6 per cent to £3.8bn in July compared to June, according to the latest statistics.

However he warned that there was a risk that the link between consumers and lenders could be “at best obscured and at worst broken”.

Mr Smee said the upcoming mortgage market review, and its potential to create a more “cumbersome” remortgaging process, may force consumers to consider the “merits” of their existing deal rather than ending it.

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He added: “A drawback of a market where deals can be broked and rebroked with such facility can end up as one where the crucial link relationship between end borrower and lender gets at best obscured and at worst broken.

“Given the regulatory changes coming around the tracks remortgaging will probably prove to be a more cumbersome, and certainly a more intrusive, business for borrowers than it was in the past.

“That is not necessarily a positive but it will perhaps encourage both borrowers and lenders to weigh up the merits of retaining their existing relationship against severing it in favour of an alternative.”

Mr Smee also cautioned against focusing on short-term costs over other aspects of a mortgage product.

He said: “As the market picks up, we do not want an absence of meaningful lender-borrower relationship to recur as it can lead to an overemphasis on particular aspects of products, especially short-term price at the expense of other features. We should not be a market where price is the only differential.”

Adviser view

Trevor Mitchell, adviser for Edinburgh-based Robson Macintosh, said: “I disagree with this. People remortgage because they want to pay less and advisers need to do what is in a client’s best interest. I cannot see downsides to high levels of remortgaging because that should force lenders to offer better standard variable rates.”

FIGURES:

£3.8bn - level of remortgaging in July 2013

8.6 per cent - increase from the month before

15.2 per cent - year-on-year increase from July 2012