Tackling the loyalty penalty

Miles Robinson

January 30, 2020

Miles Robinson (pictured) is head of mortgages at Trussle

Tackling the loyalty penalty in the mortgage market should be a priority for the government, industry, and the regulator.

Mortgage overspending is having a detrimental impact on consumers. Our research shows that two million people are trapped in costly Standard Variable Rates (SVRs) – unjustified rate hikes that kick in when the fixed term of a mortgage runs out.

These people are overpaying their banks by an average of £4,500, every year. This collectively amounts to almost £9bn.

Owning your home should mean stability and freedom; but getting a mortgage brings anxiety, stress, and unequal treatment.

Theresa May previously warned that her government would act against those companies charging customers a loyalty penalty.

However, we are yet to see this same commitment from the Prime Minister.

The industry can and must act. Parliamentary attention and FCA intervention to the issue is welcome but we need to expand our ambitions.

Mortgages are the largest source of debt for households in the UK, but the scale of the issue is not getting the attention it deserves.

Most utilities markets have seen significantly more support from policymakers in pursuit of better consumer outcomes.

We believe that the government should introduce a Mortgage Reform Bill to make sure that lenders commit to greater transparency and address the loyalty penalty in the mortgage market.

The Bill would introduce the following injustices:

  • True cost: Lenders must display the True Cost of a mortgage’s initial rate period. True cost sets out what the customer will pay over the initial term, including obligatory fees, charges or incentives in addition to interest.
  • Borrower information: Lenders must show borrowers key mortgage information online, and/or via electronic communication.
  • Borrower Contact: Lenders must ensure that borrowers were contacted at least three months before their initial rate period ends, electronically and by post.
  • Level playing field: Ensure a level playing field for those who are self-employed or retired with the requirement for the Government to improve the accessibility of tax documents and introduce greater flexibility in tax reporting methods.

At Trussle, we’re campaigning to make mortgages fairer.

We want to ensure that lenders commit to greater transparency to help borrowers switch easily and eliminate the mortgage loyalty penalty once and for all.


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