Leading broker calls for mortgage switch guarantee

Posted 27 July 2017 by Nick Parkhouse

Leading mortgage broker calls for the introduction of a ‘Mortgage Switch Guarantee’ to support remortgage lending

With over three million accounts switched, the Current Accounts Switch Service has been a huge success. The initiative makes it easier for consumers to switch banking provider, and now a leading mortgage broker is calling for a similar guarantee to be introduced for people wanting to switch their mortgage.

A leading online mortgage broker is calling for the introduction of a ‘Mortgage Switch Guarantee’ in an attempt to help consumers save thousands of pounds in mortgage interest.

Broker seeks industry support for Mortgage Switch Guarantee

Trussle has outlined proposals to introduce a ‘Mortgage Switch Guarantee’ in order to get more borrowers off their lender’s standard variable rate (SVR).

Trussle’s paper aims to address ‘switching inertia’ and the issue of so-called ‘mortgage prisoners’ – those who have been unable to remortgage due to strict affordability criteria.

Trussle CEO Ishaan Malhi, said: “In the UK, there are three million homeowners on SVR. While the exceptional few actually benefit financially from being on an SVR, most will be paying a default level of interest which is often inexplicably high.

“If every one of these borrowers were transferred to a market-leading mortgage product, the annual saving to consumers would be in the region of £15bn, or more than £4,900 per head.”

Trussle have identified five areas where improvements could be made. These are:

  • The standardisation and simplification of pricing structures
  • The standardisation of lender communications
  • An obligation for lenders to offer new deals to mortgage prisoners
  • Giving brokers access to all deals on the market
  • The modernisation of slow and outdated processes

The broker will now consult with relevant organisations across the industry and review recommendations for the guarantee based on feedback. The broker will then seek support from regulatory bodies before presenting the Mortgage Switch Guarantee to the Department of Communities and Local Government and try to win its support so that the proposal can be put to Parliament.

Writing in the white paper, Paula Higgins, chief executive, Homeowners Alliance, says: “Mortgages are based on a long-term relationship between the lender and its customers and lenders should have a duty to treat their customers fairly throughout that period. Lenders shouldn’t take advantage of their customers by financially penalising loyalty. Instead, like other industries they should look to reward loyalty.”

Challenger bank launches market-leading remortgage deal

The news comes as one of the UK’s ‘challenger banks’ launches one of the cheapest remortgage deals on record.

Atom Bank has launched a five-year fixed rate at just 1.59% for remortgage borrowers with 40% or more equity in their home. The market-leading rate comes with a free valuation and free legal work. There is a £900 fee.

Maria Harris, head of mortgages at the bank, says: “Our commitment is to be a low cost bank and always give customers the best deal we can. There's a lot of uncertainty in the market right now so giving customers the option to fix for five years at a great rate could help to give people more security.”

Borrowers cannot access the Atom Bank deal directly and must go through a broker.

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