The government is considering the possibility of providing a faster process for switching mortgage providers. If the plans are ultimately implemented, it will mean that homeowners could change to a new home loan deal within a week in order to ensure that they get the best rate.
Currently, seven days is the length of time it takes for people to switch bank accounts. A government consultation is now looking into the feasibility of making it possible to change mortgages within the same timeframe.
Under the proposals, consumers would only have to deal with their new provider when switching. After arranging a switch with the lender offering the deal they wish to move onto, the new lender will handle the changeover process and all communication with their old provider. This, too, would bring the process of switching mortgages more in line with that for changing bank accounts.
The possibility of a rapid switch process for mortgages is contained within the Digital Economy Bill, which was revealed in the Queen’s Speech. The government hopes to make it easier for consumers to change providers of key services and switch to better deals, including mortgages as well as a wider portfolio of utilities and services.
Business secretary Sajid Javid said: “I want to give consumers more power over switching providers for the services they rely on, to make sure they are getting the best deals.”
Some have questioned the feasibility of the proposals in their current form, however. They point out that switching a mortgage is more complicated than changing bank accounts, and requires a greater volume of checks and precautions. For example, borrowers must meet stringent affordability criteria, and lenders also need to conduct a survey of the property that the mortgage will relate to. As such, it may not be possible to reduce the switch process to the same seven day timeframe that is in place for bank accounts. The government consultation will aim to establish whether this is indeed possible and practical, or whether a longer period is required.
The proposals cover a number of other services as well as mortgages. It is also suggested that mobile service providers could be required to unlock handsets for free, allowing them to be used with other networks once the contract with the current provider has expired. At present, mobile network operators do offer the option to unlock handsets for use with other networks, but most charge a fee, costing consumers a collective £48 million per year.