Online mortgage broker Trussle has put forward a set of industry standards to tackle switching inertia and the problem of so-called ‘mortgage prisoners’.
The firm has published a white paper calling for a mortgage switch guarantee, which includes five recommendations to cut what it has estimated is the £15bn consumers are overpaying every year – an average of £4,900 per household - by failing to switch to the most suitable mortgage rate.
Trussle identifies a lack of uniformity and education around the pricing of mortgages to inadequate communication from lenders when it comes to prompting customers to switch as causing the problem.
The broker wants standardised and simplified pricing structures so consumers can make better product comparisons.
The white paper also calls for the standardised lender communication to ensure borrowers know the benefits of switching before their product term ends.
‘Mortgage prisoners’ – borrowers trapped on standard variable rates (SVRs) and unable to switch due to stricter affordability criteria introduced by the Bank of England in 2014 - would become a priority for lenders under the proposals, which would see them force to offer the customers new products.
Trussle also wants brokers to be given access to all deals on the market, as restricted distribution can limit borrowers’ switching options – particularly when specialist mortgages are required.
Better online communications to facilitate switching is another demand.
The £4,900 figure was calculated using an average mortgage value of £130,800 based on January 2017 house prices, and involves switching onto the best two-year fixed rate – Yorkshire Building Society’s 0.98 per cent – from an average SVR of 4.77 per cent.
According to CACI’s Mortgage Market Database, there are 3m borrowers on SVRs in the UK, leading to a total saving of £15bn.
Trussle founder Ishaan Malhi said: “The Energy Switch Guarantee, introduced last year after more than a decade of lobbying and hard work, has already helped five million energy customers save an estimated £1bn.
“The impact of the Mortgage Switch Guarantee has the potential to be fifteen times greater, which is why we won’t be slowing down our efforts to deliver a fairer mortgage market for homeowners across the UK.”
Andrew Montlake, director at London-based Coreco Group, commented: “This is something that adds to the growing clamour for justice for a lot of people who are just sitting on an SVR. For some it is just a case of apathy, but there are quite a few people who don’t have the benefit of choice.
“For me, the days of treating existing customers worse than new customers should be long gone in any walk of life. In any business, it is about looking after clients – and lenders should be no different.”
simon.allin@ft.com
