Would you like to be able to switch mortgages as quickly as you can change bank accounts? Well, that option may soon be open to you, as the Government is currently consulting on plans to implement seven-day mortgage switching to offer a better service to borrowers.
This could come as welcome news to borrowers, with the process currently taking up to three months (but typically between four and eight weeks, says the Department for Business, Innovation & Skills) to transfer to a new mortgage deal, far longer than it takes to switch just about any other financial product.
The Government therefore wants to bring switching timings in line across sectors, proposing that it be reduced to a maximum of seven working days to arrange anything from a new phone line to energy contracts. Mortgage switching is central to this proposal, with the recommendations following on from the success of the Current Account Switch Service.
Essentially, the proposals mean that consumers would only need to deal with the new mortgage provider when they decide they want to switch, much in the same way that they only deal with their new current account provider when switching products. The seven-day period would commence when the consumer gives their consent to switch to the new provider and the new provider accepts that customer, it said in the Call for Evidence, and could speed up the process dramatically.
However, these proposals are far from set in stone, and the Government is seeking responses from the industry to see if this kind of seven-day switching system could actually work in practice. In particular, it's asking what processes and cost barriers could hamper such a reduction in switching times, as well as the kind of redress that could be offered should things go wrong and how switching services could be facilitated, and seeks to understand the "specific characteristics" of switching across different sectors of the financial market.
This means that the dream of being able to switch mortgages in seven days could, for now, be a pipe dream only, and with the idea attracting some criticism from the industry, it could be even further away from reality than we think.
The Council of Mortgage Lenders (CML), for example, has raised concerns about the feasibility of such a timeframe, and questions "when the clock would start ticking". The organisation points out that there are major differences in the mortgage market compared with the others in the scope of the enquiry, specifically in terms of regulatory requirements and other necessary processes.
Quite simply, the process of securing a mortgage isn't as simple as switching bank accounts – mortgage lenders have to conduct strict and detailed affordability assessments to meet regulatory rules, and they also require property surveys and valuations to be carried out, both of which make switching harder to complete in a tight timeframe compared with the processes of some other sectors. There's also the intermediation aspect to consider, particularly when it comes to remortgages, not to mention the raft of changes that have already affected the mortgage market in recent years – and there's still more to come.
Paul Smee, CML director general, commented: "We fully support the switching principles, and our members have long recognised that speed (as well as cost and service) is frequently valued highly by remortgage customers. However, whether a seven-day target is realistic, given tasks that lenders need to complete to fulfil risk and regulatory requirements, depends on when the clock starts ticking."
So, the dream of seven-day switching may not be with us for the time being, and even the proposals could change dramatically by the end of the consultation. The call for evidence will remain open for the next four weeks, after which the Government will consider what, if any, changes to the switching process should be included in the Better Markets Bill later this year.
However, you don't have to wait for the outcome to get a better deal on your mortgage. It may take a while to switch at the moment, but the time spent could be worth it, particularly if you're thinking about switching to a low cost fixed rate mortgage – rates are among the lowest ever recorded, and if you fix, you can secure your low repayments for the foreseeable future. Check out our mortgage best buys to get started, and get switching to a better deal.
Disclaimer: Information is correct as of the date of publication (shown at the top of this article). Any products featured may be withdrawn by their provider or changed at any time.
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