Online mortgage advisers Trussle and Habito have both backed ‘mortgage switch’ policies in an effort to encourage consumers to avoid lenders’ standard variable rates.
A standard variable rate is the most common ‘reversion rate’ offered by lenders after a fixed-rate product ends and it can amount to more than double the initial rate offering.
But online brokers Trussle and Habito have independently backed campaigns and ‘switch policies’ to encourage consumers to remortgage or transfer products to a different lender at the end of their fixed-rate period to avoid overpaying.
Trussle also called for a ‘Mortgage Switch Guarantee’ to make the switching process fairer, and has taken the plea to parliament.
The online broker wants a law to be passed that forces lenders to display the true cost of a mortgage — including all hidden fees and service costs - in one transparent fee and to alert borrowers to this three months before the end of their initial term.
Trussle’s founder and chief executive, Ishaan Malhi, said: “Mortgages are one of the biggest and longest-serving injustices facing consumers today.
“One in four mortgage holders are sitting on expensive and arbitrary SVRs, which is £375 per month per household or £25m per day, on aggregate.
“This costs British homeowners £9bn every single year. It’s crucial to put pressure on providers to make mortgage switching fairer.”
Others have backed the plea, with shadow city minister Jonathan Reynolds MP describing the volume of people defaulting to their SVR as a “genuine issue” as he called on the financial sector to “work better to serve our people”.
Morgan Wild, senior policy researcher at Citizens Advice, said the sector needed “better, smarter regulation to stop people falling onto SVRs”.
Meanwhile Habito’s research found 55 per cent of mortgage holders could save nearly £300 per month by switching, so the online broker has launched a ‘four months’ notice’ commitment where the broker firm will ensure all its customers have four months to switch their mortgage prior to the end of their fixed-rate deal.
The firm also urged other lenders to do the same, commenting that only one of the UK’s ‘big six’ was currently committed to giving customers three months notice.
Daniel Hegarty, founder and chief executive of Habito, said: “We’re calling for mandatory communications notices from all mortgage lenders and banks starting at four months prior to the initial period ending, and across email and text.
“As is so often the case in traditional financial services, loyalty is penalised rather than rewarded. The longer you stay with the status quo, the more you pay.”
Last year, Citizens Advice launched a super-complaint with the Competition and Markets Authority calling for the ‘loyalty penalty’ paid by consumers in the mortgage market to be remedied.
It later confirmed the complaint was prompted by the treatment of vulnerable customers who ended up on SVRs and the CMA has since urged the Financial Conduct Authority to take “strong action” on firms levying the ‘loyalty penalty’.