CML criticises government mortgage switching review

CML criticises government mortgage switching review

The Council of Mortgage Lenders’ director general has taken issue with governmental and regulatory attempts to institute a seven-day mortgage switching regime, at the same time a digital broker has revealed many are “overwhelmed” by the process.

Paul Smee suggested in a recent blog published on 20 June that the recent Department for Business, Innovation & Skills’ call for evidence - which suggested lenders should be forced to complete switches within a week - was a solution in search of a problem.

He compared the government’s consultation with a similar call for input from the Financial Conduct Authority, although the latter took in the wider remit of mortgage market competition.

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“By contrast, BIS comes from the other end of the telescope and asks where seven-day switching is appropriate across a range of sectors, which encompasses mortgages, but also extends to retail banking more generally, as well as utilities and telecoms,” Mr Smee stated.

In comparing the mortgage market to others where switching is quicker and easier, he pointed out several flaws:

First, almost all mortgage customers are advised as they work their way through the switching process, providing some safeguards, but as the FCA pointed out, also being a perceived cost for some consumers.

Second, checks over affordability, creditworthiness and all the apparatus of Mortgage Market Review will inevitably be more intrusive and time-consuming than in the other markets, where the sums are smaller and the contracts shorter.

Third, as the regulator noted, brokers have developed sophisticated strategies to engage with previous clients, coming up with various “switching prompts” that might affect consumer behaviour.

Mr Smee said the CML’s consultation response would stress the “inhibitions” imposed on switching speed by recent regulations and point out how dependent plans would be on when the clock starts ticking.

“If that occurs when lenders have completed all the necessary checks and confirmed to the customer that the deal can go ahead, then many lenders may already be delivering a seven-day switching service,” he added.

The industry body’s arguments came as digital mortgage broker Habito published research suggesting people were put off remortgaging due to the complexity of the application process.

A YouGov survey last month of 4,236 UK adults, of which 1,258 were mortgage owners and 33 had a mortgage through shared ownership, found 23.6 per cent said no reduction in interest rate would make them consider changing their mortgage product.

In addition, 12.38 per cent were overwhelmed by the whole experience of applying for a mortgage and 5.7 per cent said the process of getting a mortgage was the most stressful experience of their life.

Daniel Hegarty, chief executive and founder of Habito, said the fact that people are willing to potentially handover hundreds, if not thousands, more than they need to, rather than re-apply is a “shocking indictment” of the service they are receiving.