5th May 2015
New research has highlighted a dramatic reduction in number of consumers saying it was easy to switch their mortgage since new rules came into force under the Mortgage Market Review 12 months ago.
Home insurance is the easiest product to switch, followed by car insurance and credit cards. Mortgages are now the hardest financial product to switch according to a new survey of customers who have shopped around for financial services in the last 12 months.
The research, conducted by comparison site Gocompare.com, shows that just 59% of people who recently switched their mortgage provider described the process as ‘easy’. Back in July 2014 when the same survey was carried out, that figure was 70%.
The substantial reduction suggests the Mortgage Market Review, which was introduced at the end of April 2014, is continuing to frustrate consumers. The new system means that anyone needing a mortgage to buy a home, increase a current mortgage or re-mortgage needs to pass a more stringent affordability test, while interest-only applicants need to be able to demonstrate a credible repayment plan.
MMR changes have subsequently been blamed for a fall in mortgage applications and delays in processing approvals.
The majority (90%) of customers who switched home insurance providers in the last 12 months found the process easy, followed by 88% for car insurance switches (up from 84%) and 82% for credit cards. Changing broadband provider (72%) and mobile phone (70%) completed the bottom three alongside mortgages.
Energy and bank current accounts – two product areas that have benefited from improvements in the switching process recently performed only slightly better. Only 75% said they found switching their energy and bank account easy.
GoCompare says that research has found just over half of customers using the website could save up to £213.29 on their car insurance, up to £116.33on their home contents and buildings insuranc and £286 on their energy bills.
Matt Sanders from Gocompare.com, says: “It is clear from our research that consumers have taken issue with the changes to the mortgage application process introduced 12 months ago. To put it into context, the recent improvements in bank account and energy switching have failed to register at all on this survey, yet mortgages have slipped 11 percentage points. It would be fair to say that mortgages were never the most straightforward product to switch, but MMR has added an extra layer of complexity and in many cases led to delays in the process which just frustrates people further.
“Familiarity clearly plays a part in consumers’ perceptions around ease of switching, with home and car insurance seen as the easiest products to switch. These are annual products so consumers are often more aware of the switching process and providers have to maintain slick procedures to manage the volumes effectively. However, for most of the other products in our list – including mortgages – providers need to up their game as the switching genie is well and truly out of the bottle, and consumers expect a good service when they have spent time shopping around to find a better deal.”
Sanders says that while the MMR has undoubtedly prolonged the process of applying for a mortgage, it is good to know that affordability is now at the heart of what lenders offer.
He adds: “Even though applying for a mortgage is more complicated, there has never been a better time to shop around and with record low interest rates, the hassle of going through the checks and balances might be worth it to save yourself some cash every month.”