Brokers and mortgage experts have given a thumbs down to Government proposals to introduce seven-day mortgage switching.
The proposal, outlined in the Better Markets Bill, would extend the seven-day current account switch pledge to a range of services, including mobile phones, broadband, home energy and mortgages.
Mark Harris, chief executive of mortgage broker SPF Private Clients, said seven-day mortgage switching “makes for a wonderful soundbite” but the reality could be very different.
He said this will hardly give lenders enough time to carry out a valuation of the property, unless there is a wholesale switch to automated valuation models.
Harris also warned it could force up mortgage costs. "Lenders model pricing on how long they anticipate borrowers staying with them so if there is a lot of chopping and changing as borrowers become more short-termist in their outlook, then pricing and early repayment charges could be forced upwards.”
Borrowers who switch their mortgage frequently will undergo numerous credit checks, which could affect their credit rating, Harris added.
Karen Hedges, mortgage manager for First Complete, part of LSL Financial Services, said the proposal could be a “profoundly negative step for the mortgage market”.
“This Bill naively compares swapping a mortgage, the single biggest financial contract for a household, with changing mobile phone or energy providers.
“I am sure processes could be faster for an A-class applicant with an immaculate credit record who is applying for a pound-to-pound remortgage with a low LTV, but it won’t work for the majority.
“Even more worrying is that if a wrong decision is made with a mortgage it could cost someone thousands of pounds, and possibly their home.”
Andy Knee, chief executive of LMS, welcomed the consultation as potentially improving choice, competition and convenience for remortgage customers.
“It’s important to remember that a number of factors impact the completion of a remortgage deal, including the speed of distribution of a mortgage offer to solicitors as well as the timescales for delivering information about the property title back to the lender.
“In order to meet new requirements, conveyancers and lenders will have to work hand in glove, and should be prepared to allow for change and flexibility in their current workflows.”
He warned that faster turnaround times could leave the industry more vulnerable to mortgage and conveyancing fraud.