Proposals in the government’s Digital Economy Bill intend to make switching a mortgage deal for homeowners possible within a week.
The Digital Economy Bill would make switching within seven days possible across a wide range of services from telecoms, energy to mortgages to make sure consumers are getting the best deals.
Ministers believe the process of moving between companies is too complex and want to bring them in line with switching bank accounts which must complete within seven days.
The government wants to find out if it would work more widely such as switching remortgage buyers or buy-to-let landlords when they look for new mortgage deals.
Mortgages are complex to switch
Unlike switching bank accounts, the regulation requires complex affordability checks and lenders also must engage third parties to survey the property.
Before offering a mortgage, lenders must consider income and commitments such as child care costs and outstanding loans which are stress tested in relation to rising interest rates.
The Council of Mortgage Lenders (CML) members recognise that speed and cost of service are valued by remortgage buyers.
Paul Smee, director general of the CML said he supported faster switching but questioned whether a one week was a realistic timescale, as lenders need to complete risk and regulatory requirements.
Interpretation of the switch plan
The BIS consultation refers to the seven day period beginning when the consumer consents to the switch and new provider accepts the customer.
According to Mr Smee if this is the case, risk assessments, survey of the property and affordability checks could be completed before the seven day period starts and many lenders are already meeting this interpretation.
The switching plan would not apply to other types of mortgages that are arranging new finance to buy properties such as first time buyers, buy-to-let investors or home movers.
Existing lifetime mortgages for equity release mortgage buyers are unlikely to be included due to the complex nature of these products.
Mortgages remain the most difficult service to include in the seven day switch with current duration to switch providers taking four to eight weeks.
What are your next steps?
Talk to our London City Mortgage brokers for advice if you remortgage your existing home and want the best mortgage deal or release capital, buying your first home, moving home or are a buy-to-let investor.
Learn more by using the equity release calculator, mortgage cost calculators, and property value tracker chart. Start with a free mortgage quote or call us and we can take your details.
For older homeowners releasing equity from your property, our LCM mortgage advisers can recommend the lifetime mortgage, accessing wealth to maintain your lifestyle or even give to a family member.
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