The Financial Conduct Authority (FCA) has unveiled its latest research into mortgage switching and how customers can be encouraged to seek out better deals.
The FCA will be releasing a consultation paper later this year to discuss potential remedies of intervention.
Research found the factors that contribute to the decision not to switch include a lack of time, a fear of the application process and contentment with their current lender or deal.
The FCA claim that consumers could feel better engaged with the switching process if “given the right information at the right time”.
In addition, the research found that consumers that do not switch are less likely to be vulnerable compared to the general population.
The FCA found that those not switching had an average income of around £46,600 per year.
This compared to households that switched having an average income of around £50,900 if they switched internally and £58,700 if they switched externally.
Those who did not switch also lived in areas that are “neither particularly deprived nor particularly affluent” and were more likely than those who switched to be older.
These group were more likely than those who switched to have a mortgage in the name of a single borrower but were less likely than those who switched to have used a mortgage broker to find their initial deal.
The Mortgages Market Study identified that some consumers are choosing not to switch to cheaper deals, despite being eligible to do so, resulting in 800,000 consumers missing out on an average of £1,000 a year by not changing deals.
The study by the FCA looked at implications for further action which involved engaging consumers in the switching process, setting out the case for switching and giving individuals enough of the right information.
Karen Noye, mortgage expert at Quilter, said: “It is a great time to remortgage at the moment, with so many good deals on offer.
“We remain in an era of incredibly low-interest borrowing and if you don’t shop around you could be missing out on the best deals available.
“Many people have taken advantage of the low interest rate environment to lock-in to a favourable rate of interest in order to give themselves a sense of certainty and security.
“A willingness to search out a better deal keeps mortgage lenders honest and ensures a healthy, competitive market.
“Interestingly, there isn’t a huge gap in the household earnings of ‘switchers’ compared to ‘non-switchers’.
“This implies that the problem is common across households up and down the country within different earnings levels, and isn’t isolated to high earning households that don’t see the value in getting a better deal.
“Sadly, a lack of shopping around and switching is a familiar theme.
“In other financial markets, most notably in the retirement market, evidence shows that consumers often struggle to shop around for the best deal.
“This caused major problems in the annuity market, and continues to be a challenge in the drawdown market, where non-advised customers often stick with their incumbent pension provider instead of switching.
“Similarly, there has been a lot of work done to encourage bank account switching over fears that consumers were not getting the best deal for them.
“In the case of a mortgage, it is the biggest single expense for millions of households and getting the best rate available by shopping around at the end of your term is crucial.”