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May 20 – Putting remortgage to the sword

As part of the Mortgages Market Study, the FCA said that more needed to be done to help ‘less active’ consumers who remain on their mortgage reversion rate at the end of any initial term.  This was also highlighted in the Citizens Advice super-complaint to the Competition and Markets Authority (CMA), and in its response, the FCA committed to prioritise ensuring that markets work well and provide fair outcomes for longstanding and vulnerable consumers.

The FCA has undertaken consumer research to understand why people stay on their lender’s reversion rate when it would be financially beneficial to switch.  The research found the factors that contribute to inertia include a lack of time, a fear of the application process and relative contentment with their current lender or deal.  Non-switchers overestimate the difficulties of switching and underestimate the benefits.  Research suggests that consumers could become better engaged if given the right information at the right time and by setting out the case for switching.  It recognises that mortgage switching is common and that any policy changes aimed at encouraging switching would need to be evaluated to ensure a net-positive impact.

The research paper suggests that an intervention providing non-switchers with an estimate from their current lender of the amount they could save if they switched internally would be the most effective solution.  A combination of emails, letter and phone calls would be most likely to be effective.  They believe it might also help if lenders provide an estimate of the amount of time it would take to switch.

The FCA is considering a number of different remedies upon which it intends to consult in the fourth quarter of 2020.  The policy statement and any subsequent rule change is envisaged to be published in early 2021.

We at AMI are exceptionally concerned with the concept of regulation encouraging PT comparisons as the preferred switching solution.  Advice and remortgage has to be an option for all, not lenders simply keeping their own.  This will be a fight that all intermediaries will have to engage in.  This cannot be a solution that the CMA can see as fair in what should be competition driving better consumer solutions.

Robert Sinclair
May 2020

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