Seven day switching unthinkable
Rob Clifford is group commercial director at the SDL Group which is a shareholder at CENTURY 21 UK, MoneyQuest and Stonebridge Group
Our culture seems to be fixated on the future – a brief glance at an array of TV, books and films that are ‘surfing the zeitgeist’ will show you an inordinate amount of content deliberating on how exactly the future might look. But the optimists amongst you might wish to avert your eyes, because as far as I can tell most of this future-fantasy genre portrays the years to come as being characterised by zombies, dystopian landscapes, the annihilation of the human race, aliens, out of control global warming and (if we’re very lucky) a long, slow and painful death.
Now, I freely admit that I haven’t taken in every single piece of work in this genre, but from what I can tell not one author has gazed into their crystal ball to see a future dominated by seven-day mortgage switching. If you’re business secretary, Sajid Javid (pictured), this is probably somewhat disappointing. From recent utterances it appears that Javid would like to see the same type of switching that is prevalent in the current account market transferred across to any number of sectors – notably mortgages.
If you weren’t aware of the recent changes placed upon mortgage stakeholders in recent years, or had no knowledge of how the conveyancing process currently works, this may seem like an achievable feat. But speak to most people involved in the mortgage market and I would suspect some of the more polite reactions would be along the lines of: ‘It’s pie in the sky’, ‘When does the clock start?’ ‘Wouldn’t we be doing this already if we could?’
Of course that doesn’t mean that it’s not something worth pursuing. For what it’s worth, I think the entire industry would be delighted if we were able to cut down the amount of time it takes customers to switch mortgages. But sadly we can’t ignore the significant burden of responsibility placed upon lenders, in particular, in order to get any mortgage through to completion. Adding the pressure of placing a one-week deadline on this process is unthinkable.
In that sense I think, as so often before, we need to marry up what the government is asking the regulators to achieve, and what it might wish to deliver from a more political and consumer-driven point of view. On the one hand, we saw the welcome introduction of the MMR, forcing lenders to take far more time and undertake far more detailed scrutiny into the ability of its customers to afford their mortgage. This also led to far greater focus on responsible lending, which resulted in a longer underwriting process. And yet here the government appears to be asking lenders, and all others, to try to make those decisions within a far shorter timescale – and that’s without even looking at the conveyancing process, which can be intricate, complicated and time-consuming on its own.
I note that the CML immediately issued a statement suggesting that a seven-day turnaround is achievable, but this comes with a great number of caveats, the greatest of which is the fact that the seven-day period wouldn’t actually start until 99% of the work was already undertaken. Essentially, in this scenario, seven days would start when the client agreed to switch and the lender had accepted the switch. It seems eminently sensible but I wouldn’t be too sure that the government were of the same mind when it came to what should take place within those seven days – I suspect they would be looking for the seven days to start much earlier in the process which would be nigh on impossible for almost all lenders to achieve.
But I have no desire to be negative about a proposal that I do think has fundamental merit – I just think that if we’re going to talk about mortgage switching timescales we need to be focused on much more achievable figures. Certainly, if we’re looking at remortgaging, it shouldn’t be beyond the scope to get this down to a matter of weeks, rather than the months it can currently take. Automated valuations, for example, could certainly support this, but we also have to recognise that we are likely to see some real changes by lenders if customers are going to switch much more regularly because of this. ERCs may be upped, indeed, as might pricing across the board – after all a lender wants to hold onto a client as long as possible not see them heading out of the door with alarming regularity.
And I really do think that a focus on smoothing the timelines for changing one’s mortgage and having a process which can achieve this, is laudable. But it’s crucial to ensure the mortgage market is not being told to tighten up its underwriting, to take more time and ensure greater compliance on the one hand, while simultaneously being forced to get everything done yesterday. Down that way true madness lies, and I fear the mixed messages will produce a result that no-one would be happy with. A far more efficient, focused mortgage process which delivers confidence to all is a goal worth pursuing – but let’s not produce over-ambitious targets for the future which are simply unachievable.