Two in five borrowers who reached the end of their fixed term mortgage deal since the first lockdown began took no action to switch, according to Citizens Advice.
An August survey of over 3,450 adults by the charity found 42 per cent of people whose fixed term mortgages came to an end since the first lockdown in March last year had taken no action to switch. According to Citizens Advice, this amounted to 2.9m people.
It also warned the burden was falling on consumers to get the best deal and that those who cannot, or will not, switch were at risk of paying “over the odds” for their mortgage.
The charity’s research also found that one in five borrowers (21 per cent) who did not switch said the process was too time consuming or difficult.
According to Citizens Advice, many were also unable to switch due to circumstances outside their control, such as mental or physical ill health and additional pressures resulting from the pandemic.
Alistair Cromwell, acting chief executive of Citizens Advice, said: “The pandemic has had a devastating impact on household finances. While the FCA acted fast to protect mortgage customers from the more immediate impacts of the pandemic, many will be facing long-term financial difficulty in the months and years to come.
“As the pandemic continues to take its toll on our finances, employment, health and relationships, it’s more important than ever that customers aren’t penalised for not switching.
“As Covid support schemes come to an end, tackling the loyalty penalty is one way that regulators can protect consumers from unfair and unnecessary costs. The FCA acted decisively at the start of the pandemic and needs to act decisively now. The regulator should introduce concrete and enforceable plans to reduce customer bills now, to finish the job on the loyalty penalty.”
In 2018 Citizens Advice launched a super-complaint with the Competition and Markets Authority to call for the "loyalty penalty" paid by consumers in the mortgage market to be remedied.
It had found 1.2m borrowers paid a mortgage loyalty penalty of £439 a year based on customers left on their lender’s SVR and called for the FCA to do more to protect vulnerable clients.
In July 2019 the FCA pledged to act to protect consumers affected by price discrimination in the financial services market following a consultation.
Last April it said it would develop a way of assessing whether firms are offering their clients "fair value".
Sam Cattell, founder and mortgage adviser at Mindful Mortgages, commented: “Education around the benefits of switching might be needed more in the industry, to avoid potential savings being missed for customers.
“There is also the possibility that borrowers may have made assumptions that they were unable to switch, particularly if their situation had changed since their product began.
“If they had been negatively impacted since Covid and thought that would stop them from being eligible for a switch when in fact they still may have been able to and potentially benefitted from doing so.”
chloe.cheung@ft.com
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