Making mortgage product transfers more accessible

There has been much debate about customers on mortgage back book or reversion rates and whether enough is done to ensure customers are able to switch when they want or need to.  Lenders have made considerable strides in contacting customers around the end of a fixed term and made it easier for people to switch on to a new rate.  This is demonstrated by the figures published today by UK Finance which show that nearly 1.2 million people took a product transfer with their existing lender in 2018. This is almost £150 billion of activity.  Add that to just under 480,000 people who remortgaged in 2018 (worth £85 billion) and this means that almost one in five of the mortgage population switched to a new deal in 2018. 

The increase in the availability of product transfers from lenders provides customers with choice in the way they transact. Many lenders will allow customers to carry out a product transfer quickly and easily online, over the phone or by post on an execution-only basis. For those who require help in choosing the right product, mortgage advice is widely available through both direct channels and from intermediaries, with more than half of borrowers taking advice for their new deal. If customers are unsure whether a product remains right for them, or have had a change in circumstances, they should always seek advice.

However, we recognise that there are some customers who may not realise they can get a new deal.  That is why in response to the publication of the Financial Conduct Authority's interim report on the Mortgage Market Study last May, UK Finance worked with its members and other trade associations to deliver a voluntary industry agreement to help existing borrowers of active lenders on reversion rates at the end of July 2018. Thousands of customers will have been contacted by their lenders by the end of 2018.

However, there is more to be done for the thousands of customers with inactive lenders or unregulated owners - particularly where they can demonstrate they are successfully making higher payments. The current rules prevent many of those customers from remortgaging to another lender. The FCA has signalled their willingness to consider a relative affordability test for these customers, which they will consult on this spring, and which will allow active lenders to offer remortgage products for customers of closed books.

It's important to recognise that some customers positively choose to stay on a reversion rate. This may be because they have a small balance or a short time left on the mortgage.  There may also be flexible features of the mortgage that they don't want to lose, or they may be anticipating a change in circumstances. Whatever the reason, customer choice is important and UK Finance figures published today show high levels of customer engagement.


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