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Lender commission puts off borrowers using brokers – FCA

  • 10/03/2020
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Lender commission puts off borrowers using brokers – FCA
People who don’t use a broker to take out a mortgage feel uncomfortable that intermediaries receive commission from the lender, research for the Financial Conduct Authority (FCA) found.


Only two in five people who fail to switch their deal at the end of a mortgage term used a broker to take out the initial loan, the study showed.

Many didn’t like the perceived conflict of interest.

When asked which sources they would trust to give advice on switching mortgages, brokers scored well but were less highly regarded than and independent organisations and the regulator. Mortgage comparison websites and the banks themselves were also well thought of sources of information.

However, people who had used a broker felt it was beneficial as it reduced the length of time spent exploring mortgage deals.

Overall, people who don’t switch mortgages are very confident in managing their money.

The FCA commissioned the research to understand why people are not switching their mortgage at the end of its term, and instead staying on pricey reversion rates.

The study recommended the most effective solution would be for non-switchers to be provided with an estimate from their current lender of the amount of money they could save if they switched internally.

However, it added that this “would most likely still leave a number of non-switchers on their reversion rate”.


People who stay on reversion rates are confident with money

Non-switchers were more likely to say they are knowledgeable about mortgage matters, compared to people who switched their mortgage.

These consumers are also nearly three times as likely to contribute to savings each month than feel like they don’t have enough time to plan their finances.

The people who fail to switch their mortgage deal at the end of the term are typically older – almost a quarter are aged 55-64. This age group accounts for 12 per cent of overall mortgage holders.

A significant segment are older, wealthier men.

They are less likely than other groups to consider monthly payments important and confident in their ability to make repayments, according to the study.

There is also a segment of younger female non-switchers.

Why don’t non-switchers move?

People don’t switch their mortgage because they are typically happy with their deal and loyal to their current lender, the research summarised.

Non-switchers overestimate the difficulties of switching while simultaneously underestimating the advantages.

Half of non-switchers said the benefits of moving do not outweigh the risks

Despite high confidence in their own abilities, some consumers in this group were also unsure whether changing their mortgage would incur a penalty.

And some were also confused about whether they have switched their mortgage in the past or not.

Borrowers who don’t change deals tend to be loyal to brands, with two in five sticking with a financial provider when they find one they trust.

This loyalty is reflected in the finding that non-switchers were more likely to switch internally than externally.

Many of these borrowers had multiple products with their current lender and had been their customer for a significant period of time.

Non-switchers wanted to rely on their own judgement and conduct their own research into the best mortgage deal.

However, the evidence suggested these people are actually unlikely to do this and be more receptive to contact from their current lender.

The research outlined four key barriers to switching; never having considered switching, having decided not to switch, planning on switching but having not done so yet, and having taken steps to switch but dropped out of the process.

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