Habito has launched a ‘four months’ notice pledge’, a commitment to ensure all its customers have adequate time to switch their mortgage prior to their fixed rate deal ending.
As well as letting customers know four months in advance themselves, Habito has called for mandatory notices from all lenders starting at four months before their deal ends.
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. People deserve better than that – they need the right information about their mortgage, given at the right time, to make the right choice on what’s best for them.”
“We strongly believe we have a duty of care to our customers to ensure that whoever their mortgage lender is, we help them avoid the trap of spending more than they should on their mortgage.
“It can take anywhere up to eight weeks for a remortgage to complete so if a customer is only notified the month before the end of their deal, they’ll most likely end up paying the lender’s SVR. This could see their mortgage payments soar by 30% from one month to the next.”
Research from the online broker and lending platform showed that 55% of mortgage holders could save nearly £300 per month by switching, equating to £15.5bn across the nation every year.
And in Habito’s Mortgage Market Report published earlier this year, the FCA estimated that more than two million customers had been on a reversion rate for six months or more and that more than half a million consumers had been on one for more than five years.
In most cases, a lender’s standard variable rate is typically somewhere between 4.24% and 4.99%.
This means that someone paying off their mortgage at a rate of somewhere between 1.89% and 2.29% during their fixed term could see their monthly payments jump by up to a third when they move on to the lender’s SVR.
Habito’s research showed more than two thirds (67%) of people do not read their mortgage contract to the end, meaning many are unaware that the onus is placed on them to switch in time.
Currently there are no guidelines for lenders to give their customers any notice that their fixed term is ending or indicate if they could save by switching to a better deal.
Only one of the UK’s top six mortgage lenders, by market share, commits to giving their customers three months’ notice.
Half said they ‘try’ to notify their customers before the end of the term, ‘normally’ via a single letter in the post, while one lender said it could wait as late as one month prior, and one even said it gives no notice whatsoever.
The average remortgage takes at least one month, and up to two months to complete.
The majority (95%) of people wanted the language used in mortgage contracts to be made simpler to understand, and 93% said they want to engage with their mortgage more than once a year.
Habito issues text message alerts and emails to its customers with four months to go on their current deal, notifying them of its end date and next steps for preparing to switch their mortgage.
Before this, as a Habito customer reaches the final 12 months of their fixed term, Habito also sends customers using Google and Outlook, a calendar notification that they can use to diarise the four months’ date date in their diary.