It’s now normal procedure for consumers to switch energy suppliers every year or change their current account. Many will even swap supermarkets if it means saving a few pounds on the weekly shop.
But why aren’t borrowers equally focused on saving money on their mortgage when the savings could potentially be so much more?
Dominik Lipnicki, director of Your Mortgage Decisions, says customers view changing their mortgage lender as a “big deal” and the MMR has made the process even more daunting.
“Consumers are more likely to switch off when the process is complicated or time consuming,” he says, “It is the broker’s duty to make sure plain language is used and that we offer holistic advice, engaging clients by taking an active interest in their plans, making sure that their next mortgage is more than just a competitive rate.”
Remortgaging is clearly a big area of opportunity for brokers. It’s currently a focal point of Legal & General Mortgage Club live events being held around the country.
Jeremy Duncombe (pictured), director of the L&G Mortgage Club, says one of the reasons for borrowers’ inertia is that they are driven to action by changes in their circumstances or by proactive contact. At the moment, neither is happening.
“Base rate and SVRs have not changed for several years, so the call to action seen when home or car insurance bills land on the door mat is not happening in the mortgage market,” says Jeremy Duncombe, head of the L&G Mortgage Club. “Car insurance goes up by £100 a year, customers react and do something about it. But the mortgage statement arrives and payment is the same again for the fifth successive year, the customer is happy enough and files it for another year.”
Couple this lack of call to action with rumours about the MMR making the mortgage process tricky, and it’s easy to see how borrower apathy sets in.
Greg Sturrock, mortgage and protection adviser at Thomas Heald, says fear is one reason why borrowers don’t remortgage – they are scared of making a false move.
“I was with a customer yesterday who’d been looking at an online sourcing system and they were terrified of getting it wrong and they wanted and needed advice,” he says, “With car insurance and energy they see a saving and are not too worried if they make a mistake but a mortgage is someone’s biggest financial commitment.”
Switching, for example, your energy supplier is relatively straightforward compared to switching mortgages. It can be done quickly online and without the customer being credit checked or asked questions about their income.
When it comes to comparing mortgages, on the other hand, it’s not just about price. Consumers also need to be aware of lenders’ criteria and the impact their own personal circumstances will have on their options.
Colin Payne, associate director at Chapelgate Private Finance, points out that each person’s circumstances are unique and no comparison site will ever be able to take account of this.
He points to the CAT-standard mortgage as an example of when the industry tried to have universal criteria and standard products – take-up was low as the products on offer rarely met borrowers’ needs.
“Borrowers need to receive advice in this area and brokers offer an excellent route to obtain this,” says Payne, “For example, something very simple is that borrowers do not always think of the consequences of products with early redemption charges if they are looking to move in the future. Borrowers’ views on portability of products can be very different and no comparison site will be able to make borrowers question decisions that they make.”
