Homeowners may be able to switch from one mortgage supplier to another within seven days, should new government proposals get the green light.
The proposals form part of the Digital Economy Bill, as unveiled during the Queen’s Speech, and its consultation process will involve government meetings with industry bodies over the coming months to discuss whether the procedure for swapping mortgages could be made as fast as that for changing bank accounts.
Currently, it can take as long as three months to switch from one mortgage provider to another.
The Digital Economy Bill will also review the switching process in other markets, such as energy, broadband and current accounts.
Business secretary Sajid Javid said:
“I want to give consumers more power over switching providers for the services they rely on to make sure they are getting the best deals. The government is committed to creating a system that works for consumers and makes markets more competitive.
“At the moment the time it takes to switch depends on which service you are switching. I want to hear what consumers and businesses think of making switching quicker and more consistent across all markets.”
Under the new proposals, consumers would only need to deal with a new provider, as currently happens during the seven-day switching process for banks, and where consumers have applied for a contract online, they would be able to cancel it online.
However, critics of the plans have said that due to affordability checks and property valuations, a seven-day switch would not be easily transferred to the mortgage market.
Paul Smee, director general, Council of Mortgage Lenders said:
“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.”
Mark Harris, chief executive of SPF Private Clients has highlighted the fact that swapping mortgages frequently could affect borrowers’ credit ratings and warned that the proposals could make mortgages more expensive.
"Lenders model pricing on account of how long they anticipate borrowers staying with them, so if there is a lot of chopping and changing as borrowers become more short-termist in their outlook, then pricing and early repayment charges could be forced upwards.”
If the plans are green lit, the proposals could be in place as early as next year.
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