The Department for Business, Innovation & Skills (BIS) is consulting on the feasibility of introducing a 7-day timescale for switching services across a range of sectors – utilities, communications, and financial services, potentially including mortgages.
In response, the Council of Mortgage Lenders (CML) has pointed out there are specific regulatory requirements about the things that lenders need to do before they can agree and complete a remortgage (switch), and a valuation of the property is also a necessary component, which in combination, may make it harder to complete to a tight timescale than the processes needed in some other sectors.
There CML also said there is a high degree of intermediation which helps consumers to remortgage, and remortgages accounted for 25% of total lending in the mortgage market in 2015 – there is no evidence from the market that would suggest that the timescales to complete remortgages are seen as an obvious barrier to the incentive to do so.
The lender trade body claimed it is important to note that the BIS consultation refers to the 7-day period beginning “when the consumer gives their consent to switch to the new provider, and the new provider accepts that customer”. In the mortgage market, this may imply that the 7-day period would only begin once all the necessary risk assessments, affordability checks, and confirmation to the customer has been given, the CML said. If that is the correct interpretation, then many lenders would potentially already be operating to the 7-day timescale for completion.
Paul Smee, CML director general, said: “We fully support the switching principles, and our members have long recognised that speed (as well as cost and service) is frequently valued highly by remortgage customers. However, whether a 7-day target is realistic, given tasks that lenders need to complete to fulfil risk and regulatory requirements, depends on when the clock starts ticking.”
Andy Knee, chief executive of LMS, said: “The government’s decision to launch a consultation on expedited switching between lenders is a welcome initiative towards creating better choice, improved competition and convenience for remortgage customers. New timelines for switching will provide further incentive for remortgagors to intelligently capitalise on historically low interest rates and make substantial savings.”
“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. In addition, faster turnaround times could leave the industry more vulnerable to mortgage and conveyancing fraud, so secure and speedy communication of the requisite documents will be key, particularly when balancing robust and tight timescales with the need to be cautious and vigilant in the face of cyber-crime.
“Through our remortgage service and through our wider Panel Link offering LMS afford lenders and lawyers the opportunity to work effectively together within a highly automated, secure environment which is ideally placed to deliver a 7-day mortgage switching service, so I’m confident our vetted solicitors as well as our systems are well-placed to seamlessly adapt to potential new reforms.”