Remortgaging to be revolutionised
Dilpreet Bhagrath, mortgage expert at Trussle
This December, we saw remortgaging reaching its highest level in almost a decade, which suggests fewer homeowners are letting their loans default onto Standard Variable Rates when the initial term of the mortgage deal ends.
It’s really positive to see a steep rise in remortgaging, however, more than two million people languishing on SVRs – which are at the highest rate since 2009 – and losing out on £10bn a year in extra interest. One in three borrowers aren’t switching for various reasons:
- Lack of education around mortgage pricing and terminology
- Lack of awareness about when and how to avoid their lender’s SVR
- Lack of access to crucial information about their current mortgage
With Brexit looming and a lot of uncertainty in the water it’s critical that mortgage borrowers understand when they should switch to a more suitable deal. We as an industry need to do more to educate and encourage homeowners to remortgage when the time is right.
This week, the Completion and Markets Authority (CMA) published a paper, following the Citizens Advice super-complaint about loyalty penalty, recognising there’s a problem in the mortgage industry where many borrowers are being punished for staying with the same provider. Loyal mortgage borrowers are paying a huge excess penalty and we need to prevent this from continuing.
The CMA’s paper not only pointed out that it’s the most vulnerable and financial disconnected who pay the price for staying loyal, but also gave the Financial Conduct Authority (FCA) six months to address the issue of a lack of switching. The CMA also suggested a resolution in the form of a mortgage service akin to the Current Account Switching Service.
At Trussle we’ve been campaigning for a Mortgage Switch Guarantee for the last 18 months, to revolutionise the mortgage switching process and prevent millions of people from defaulting onto SVRs. We’re asking the mortgage industry to agree to a set of principles, which will enable transparency when it comes to true cost and the end of an initial mortgage period. From January 2019, lenders in Ireland are being mandated to contact customers at least 60 days before their initial period ends and we hope the CMA’s intervention can help to ensure this happens across the UK.