The Financial Conduct Authority (FCA) has released its latest research into mortgage switching and how consumers can be encouraged to seek out better deals.
The FCA says that they believe there is a case for intervening to help mortgage customers who do not switch. The research found the factors that contribute to the decision not to switch include a lack of time, a fear of the application process and, for many, relative contentment with their current lender or deal. It was found that consumers could become better engaged with the switching process if given the right information at the right time.
It also found that consumers that do not switch, as is the case for most mortgage borrowers, are less likely to be vulnerable compared to the general population.
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. The Index of Multiple Deprivation (IMD) ranks every small area in England from 1 (most deprived area) to 32,844 (least deprived area). The median IMD of borrowers on reversion rate was around 16,000, which is close to the median for England of 16,422. The IMD for those who switched is slightly higher: around 18,200 for internal switchers and 19,600 for external
- 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
In response to the FCA research, Dame Gillian Guy, Chief Executive of Citizens Advice, said “It’s been a year since the FCA admitted that “harm is significant” for loyal customers in the mortgage market. So it’s frustrating that in that time people have seen their loyalty penalised by a staggering £800 million.”
“We’re pleased the FCA has now acknowledged that there is a case for intervening to stamp out the loyalty penalty.”
“But we know encouraging people to switch won’t go far enough. We expect the FCA to put stronger options on the table in their spring consultation on how to end this systematic scam.”
The FCA will issue a consultation paper on potential remedies later this year.