Up to 800,000 borrowers are missing out on cheaper mortgage deals because of a reluctance to switch to a new lender.
Factors contributing to the decision not to switch include a lack of time and a fear of the application process, according to a new report by the Financial Conduct Authority (FCA).
The research also suggests consumers would be more likely to engage with the switching process if given the right information at the right time.
Now the FCA is to look at measures to help make it easier to switch to a new mortgage deal.
The research found that those not switching:
- Had an average income of around £46,600 per year. Households that switched had an average income of around £50,900 if they switched internally and £58,700 if they switched externally;
- Lived in areas that are neither particularly deprived nor particularly affluent;
- Were more likely than those who switched to be older. Their average age was 36 years old and 90% of them were 50 or younger;
- Were more likely than those who switched to have a mortgage in the name of a single borrower;
- Were less likely than those who switched to have used a mortgage broker to find their initial deal.
The FCA’s research found that to be effective, remedies would need to:
- Engage consumers in the switching process:While many of these consumers were aware of the switching process, around 40% had never considered switching with their current lender. Also, only one in five recalled being contacted about switching or renewing their mortgage deal.
- Set out the case for switching:On average, these consumers say that a monthly saving of £120 would encourage them to switch mortgage. Their main consideration is getting the best deal for them personally, including getting information on potential savings and reassurance about the other barriers in the switching process.
- Give individuals enough of the right information:This should be provided without overwhelming them and causing them to disengage.