The City regulator, the Financial Conduct Authority, said that plans should be put in place to make it easier for mortgage applicants to find the best deal on their home loans. This followed the discovery that one in three mortgage applicants are unable to find the cheapest mortgage deal.
If people do find the cheapest mortgage deal then they could save in the region of £550 per annum said the FCA. The authority also stated that it is looking into ways to assist those people that are “help prisoner by their mortgage”. These are home owners who have an existing deal that they are “trapped” in and the FCA wants to help them to switch to a better deal.
FCA Report finds Mortgage Market working well but could be Improved
The FCA published its interim report about the home loan market and said that on the whole the competition within the working was working pretty well for most mortgage applicants. But the report also concluded that further improvements need to be made.
The FCA considers obtaining the best mortgage deal to be vital given that the debt of a home loan constitutes over 89% of the overall household liabilities in the United Kingdom. They also conceded that finding the best mortgage deal is not that easy.
Although there was no real evidence to suggest that the existing arrangements between financial institutions were resulting in poor outcomes for the consumer, they said that there was not an easy way for mortgage applicants to feel confident during the initial stages about home loans that they apply for.
This means that shopping around for the best deal is a lot more difficult resulting in around 30% of applicants failing to land the cheapest mortgage deal. This 30% would be paying around £550 more at the introductory stage of their mortgage than if they had been able to obtain the cheapest home loan.
Lenders should share more information
An approach recommended by the FCA to make things easier is the sharing of qualification and other eligibility criteria with other players in the market. This would help mortgage brokers to recommend the cheapest loans and also aid in the development of helpful tools online.
The FCA is also keen to work closely with mortgage brokers so that it can be easier for applicants to compare brokers. This is needed because the choice of mortgage broker often makes a difference to how much the mortgage will cost the consumer.
Helping those Trapped by their Mortgages
The FCA also want to help people that have had a mortgage for a long time obtain a new and better deal. This applies to people that have always maintained their payments. A lot of these individuals went for an interest only mortgage prior to the financial crisis and now find themselves trapped.
After the financial crisis lending practices have become a lot tougher and this has prevented these people from switching to a cheaper mortgage. The FCA recommended the implementation of an industry wide agreement for financial institutions to accept applications from long term mortgage holders who had always made their payments.