This week online broker Trussle published a mortgage white paper, which included proposals aimed at encouraging a greater level of mortgage switching. It suggested a mortgage switch guarantee, along the same lines of the energy switch guarantee launched by the government a year ago, with proposals including:
- 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- Modernising a range of slow and outdated processes when it comes to switching.
Ishaan Malhi, founder of Trussle, said: “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 £1bn.
“The impact of the mortgage switch guarantee has the potential to be fifteen times greater, which is why we won’t be slowing down our efforts to deliver a fairer mortgage market for homeowners across the UK.”
Mortgages aren’t energy bills
However intermediaries are divided on whether such a guarantee would make any difference.
Martin Stewart (pictured), director of London Money, said it was unfair to compare mortgage finance with trying to shave a few pounds off a gas bill.
He continued: “The real issue here is the same one we have always had – client inertia.
“I have a highly paid professional client who could be saving £5,000 per year on his rate and I have spent the past two years telling him that. Sometimes there is only so much we can do.”
David Sheppard, managing director of Perception Finance, said the industry needed to do more collectively to highlight the benefits of reviewing a mortgage on an annual basis, not just when an incentive rate was coming to an end.
He added: “If the way mortgages are priced was standardised across the industry, it could mean some borrowers getting worse deals than they can under the current situation.
“Lenders use loan to value as a key factor in pricing and if the bands for this had to be the same across the industry it could remove tiers that one lender wants to offer but cannot if there needs to be conformity.”
Mark Dyason, director of Edinburgh Mortgage Advice, said Trussle’s proposals represented a good starting point for improving competitiveness in the mortgage market.
He added: “We need improved process and technology behind all processes, from the first fact find to the Land Registry and conveyancing.”