Banks and building societies contacted by FTAdviser defended their record on product switching, pointing out that they write to customers well in advance of the end of their product term to make them aware of their options.
They also said that for some customers - -such as those who are unsure whether they want to move house – standard variable rates are the right option.
An analysis of the mortgage market by the Citizens Advice Bureau (CAB) recently revealed one in 10 borrowers faced a £1,000-a-year penalty if they remained on a lender’s standard variable rate instead of switching to a better deal, with first-time buyers particularly likely to be hit by higher payments.
The majority (53 per cent) of customers who roll onto an SVR don’t remortgage for more than 10 years, the study showed.
The Financial Conduct Authority is currently investigating whether mortgage customers are able to make informed decisions about the options available to them as part of a market study, with a final report set to be published in early 2018.
But lenders would not commit to taking pre-emptive action on the issue of product switching, which, according to Citizens Advice, tends to affect older consumers, people on low incomes and those with lower education levels.
While fixed-rate mortgages are at historic lows, SVRs are considerably higher and vary significantly between lenders.
Moneyfacts figures show the lowest rate available for existing borrowers is Stafford Railway Building Society’s 2.95 per cent, while the highest is a sub-prime lending division of the Melton Building Society, MBS Lending, which charges 6 per cent.
A spokesperson for Newcastle Building Society, which has an SVR of 5.99 per cent – the second highest on the market - said: “SVR is an extremely flexible product with no arrangement fees and no early redemption charges. It typically meets the needs of customers who have small balances or for whom flexibility is a priority.
“We have no current plans to take further action as a result of this review.”
Yorkshire Building Society, Skipton Building Society and Santander all said they regularly reviewed their rates but would not commit to reducing them in light of the latest research.
A spokesperson for Coventry Building Society said: “Our SVR is competitive; in fact it is lower than the market and building society averages. Consequently, we currently have no plans to change our policy on SVR.”
