"Currently, the best-case scenario for switching mortgage is one month but it typically takes two months and could take as long as three months."
The government believes that consumers are staying with their current bank because they think switching would be too cumbersome and difficult, and that currently there is no consistency between sectors on how long it takes for consumers to switch from one service provider to another that offers them a better deal.
Its new proposals could allow consumers to switch provider in a week or less, and the rules could be in place as soon as next year.
However the mortgage industry has expressed concerns that not only would borrowers be relying on lenders to process the case in seven days, the bank will also require a valuation of the property to be carried out.
Mark Harris, chief executive of mortgage broker SPF Private Clients, believes that this will be less of an issue on lower LTVs as AVMs are available, which "would have to become more commonplace in order to make a seven-day switch achievable".
Harris added: "While in theory seven-day mortgage switching sounds attractive and makes for a wonderful soundbite, the reality could be very different. Currently, the best-case scenario for switching mortgage is one month but it typically takes two months and could take as long as three months.
"If the borrower gets into the habit of switching their mortgage frequently because it is easier to do so, then numerous credit checks could affect their credit rating, subsequently damaging their long-term prospects.
"Lenders model pricing on account of 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."
However he believes that the changes could have a limited impact on the mortgage market, "particularly when you consider that there are many people paying more than they need to on their lender’s standard variable rate because of a general apathy towards remortgaging, particularly when interest rates are so low".
Andy Knee, chief executive of LMS, added: “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."
The government is meeting with industry bodies in the coming months to discuss how the proposals could be taken forward.
