FCA plans market changes to simplify mortgage switching
The UK’s Financial Conduct Authority (FCA) has outlined its intentions to shake up the mortgage market.
Its announcement comes after a 2019 study from the watchdog found that as many as 800,000 people have been left £1,000 out of pocket every year.
According to follow-up research published by the FCA this week, poorer and older households are failing to switch mortgage providers even when better deals are available on the marketplace.
A fear of the application process, a relative comfort with current providers, and a lack of time have all contributed to consumers’ reticence to switch.
Two in five (40%) say that when they find a financial provider they trust they tend to stick with them.
Despite this, the study found that 44% of non-switchers have switched providers for different services in their lives. Two in five have switched their home insurance or energy deal providers within the last 12 months (39% and 38% respectively).
The FCA believes that consumers would be more likely to switch if armed with the right information “at the right time.”
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The announcement of the FCA’s intervention comes a year after its Mortgage Market Study, in which it found that 800,000 people were choosing not to switch to cheaper mortgage deals even when qualified.
It was estimated at the time that each of the 800,000 were missing out on savings of around £1,000 per year.
A super-complaint issued by Citizens Advice in 2018 highlighted the existence of a “loyalty penalty”, where long-standing mortgage customers of major lenders were being given poorer deals than new borrowers.
The Competition and Markets Authority (CMA ) posted its own update on the mortgage market in a follow-up to the super-complaint.
“The CMA is aware of FCA research on mortgage switching but would like to see swift progress in developing ways that help or protect longstanding customers who could switch but do not,” it writes.
Andrea Coscelli, chief executive of the CMA, says that more still needs to be done to make sure that loyal and vulnerable customers are not let down or “ripped off.”
He adds: “We urge the regulators of the industries under scrutiny to keep up the pace, and we will continue to monitor their progress.”