Mortgages  

MMR blamed for slowdown in mortgage switching ease

MMR blamed for slowdown in mortgage switching ease

The new mortgage regulations are being blamed for the slowdown in the number of customers finding it easy to switch their mortgage, with comparison portal Gocompare stating that the Mortgage Market Review is frustrating people with further delays.

A survey of 1820 carried out by Bilend on behalf of Gocompare found that in March 2015, just 59 per cent of people found it easy to switch their mortgage compared to 70 per cent in July 2014.

Gocompare said the reduction suggests the MMR, which was implemented in April 2014, is to blame.

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The new system means that anyone needing a mortgage to buy a home, increase a current mortgage or re-mortgage needs to pass a more stringent affordability test, while interest-only applicants need to be able to demonstrate a credible repayment plan.

MMR changes have subsequently been blamed for a fall in mortgage applications and delays in processing approvals. Lenders have come in for widespread criticism for leaving a number of particularly older borrowers stranded or facing hefty fees after refusing tough new affordability tests despite MMR transitional rules meaning existing homeowners not increasing their loan are exempt.

Earlier this year Halifax apologised to a financial adviser for a “one-off error” that resulted in an existing borrower not increasing their loan ensuring months of delays on what should have been a relatively simple product switch.

Most recently the Financial Ombudsman Service upheld a customer complaint after HSBC refused to give him a mortgage on the grounds that he would have been over 65 at the time of the term end.

The Financial Conduct Authority has spoken out over the practice a number of times and has raised the spectre of Treating Customers Fairly to deal with the issue.

Elsewhere, the Intermediary Mortgage Lenders Association has complained that the MMR generally disenfranchises older borrowers who are finding it extremely difficult to secure loans which end beyond their retirement date.

Matt Sanders, product development manager at Gocompare, said: “It is clear from our research that consumers have taken issue with the changes to the mortgage application process introduced 12 months ago.

“It would be fair to say that mortgages were never the most straightforward product to switch, but MMR has added an extra layer of complexity and in many cases led to delays in the process which just frustrates people further.”

He added that the MMR has “undoubtedly prolonged” the process of applying for a mortgage, but a mortgage is still one of a person’s biggest financial outgoings “therefore it’s good to know that the importance of affordability is now at the heart of what they offer, which at the end of the day benefits the customer as well as providers”.

According to Gocompare, home insurance was found to be the easiest product to switch with 90 per cent of people agreeing, followed by car insurance (88 per cent) and credit cards (82 per cent).

donia.o’loughlin@ft.com