Online mortgage broker Trussle has proposed a new set of industry standards to be introduced into the market, to offer property owners much-needed support with switching deals. In a white paper, Trussle outlines five initial recommendations for a Mortgage Switch Guarantee.
The Mortgage Switch Guarantee is designed to address wide-scale switching inertia and the issue of mortgage prisoners, both of which are costing UK property owners billions of pounds every year.
Mortgage Switch Guarantee Proposed to Help Property Owners
The white paper identifies several shortcomings in the mortgage market, which are exacerbating this inertia – some of which are expected to be addressed in the upcoming Financial Conduct Authority (FCA) Mortgage Market Study. These range from a lack of uniformity and education surrounding the pricing of mortgages, to inadequate communication from lenders when it comes to prompting customers to switch.
It also recognises that a large number of borrowers are not switching to more suitable deals because they are mortgage prisoners, trapped on Standard Variable Rates (SVRs), and are unable to remortgage because they fail the stricter borrowing affordability rules introduced by the Bank of England in 2014.
Trussle is proposing the creation of a Mortgage Switch Guarantee to address these issues and ultimately move towards a state of mortgage optimisation, where all UK borrowers are switching to the best available deals at the right time.
To initiate the proposal, the broker has made the following five recommendations:
- Standardising and simplifying the way mortgages are priced and presented to customers.
- Improving lenders’ communication with customers when prompting borrowers to switch.
- An obligation for lenders to offer new deals to customers who are mortgage prisoners.
- A mandate for all mortgage brokers to have access to all deals on the market.
- Modernising a range of slow and outdated processes when it comes to switching.
The CEO and Founder of Trussle, Ishaan Malhi, says: “Millions of homeowners are collectively losing billions of pounds because switching mortgage isn’t clear or simple. The Mortgage Switch Guarantee will help put an end to this unfairness.
“We’ve spent the best part of a year speaking with thousands of borrowers and meeting with industry leaders from across the market to identify this ambitious but necessary set of standards. Thankfully, there’s already consensus among senior industry figures that many aspects of the remortgage market are in need of improvement.”
However, he adds: “But for the Mortgage Switch Guarantee to be a success, it will need to be widely adopted by lenders and brokers, and supported by regulators and Government. We’ll therefore be speaking with and listening to feedback from these key groups in the coming months.
“The Energy Switch Guarantee, introduced last year after more than a decade of lobbying and hard work, has already helped five million energy customers save an estimated £1 billion. The impact of the Mortgage Switch Guarantee has the potential to be 15 times greater, which is why we won’t be slowing down our efforts to deliver a fairer mortgage market for homeowners across the UK.”
Paul Higgins, the Chief Executive of the HomeOwners Alliance, also comments on the proposal: “Unquestionably, changes must be made in the mortgage market. The fact that two million borrowers are on their lender’s SVR cannot simply be attributed to borrower apathy and ignored.
“Consumers have seen huge upheaval in the mortgage market over the last ten years and, with the hoops they have to jump through to meet affordability criteria now, it’s not surprising many would be confused by or fearful of getting a new deal. The mortgage industry must address this by making switching to a better deal as straightforward and safe as possible.”