"We’re calling for mandatory communications notices from all mortgage lenders and banks starting at 4 months prior to the initial period ending"
The online mortgage broker, which recently launched its first mortgage range, says this will give borrowers adequate time to switch their mortgage prior to their fixed rate deal ending.
The FCA estimates that more than 2 million customers have been on a reversion rate for 6 months or more and that more than half a million consumers had been on one for more than five years.
The FCA’s recent Mortgage Market Report found that “not all firms engage with all customers”. The report cites: “One large lender appears to segment their customers and focus retention efforts based on an assessment of a customer’s likelihood of switching to a different lender. Another large lender has historically not sought to proactively engage with customers remaining on a reversion rate for longer periods.”
Habito's research found that only one of the UK’s top six mortgage lenders commits to giving their customers three months’ notice. Half said they ‘try’ to notify their customers before the end of the term, ‘normally’ via a single letter in the post, while one lender said it could wait as late as one month prior and one said it gives no notice whatsoever.
This situation is not the case in Ireland, where new regulation was brought at the start of this year to force lenders and banks to notify all customers two months before their fixed-rate mortgage term ends and provide details of the new rate and other possible remortgage options.
Habito found that 67% of borrowers do not read their mortgage contract to the end, meaning many are unaware that the onus is placed on them to switch in time, despite 55% in line to save £300 per month by switching.
Daniel Hegarty, founder and CEO of Habito, said: “We’re calling for mandatory communications notices from all mortgage lenders and banks starting at 4 months prior to the initial period ending, and across email and text. As is so often the case in traditional financial services, loyalty is penalised rather than rewarded. The longer you stay with the status quo, the more you pay. People deserve better than that - they need the right information about their mortgage, given at the right time, to make the right choice on what’s best for them.
“We strongly believe we have a duty of care to our customers to ensure that whoever their mortgage lender is, we help them avoid the trap of spending more than they should on their mortgage. It can take anywhere up to 8 weeks for a remortgage to complete so if a customer is only notified the month before the end of their deal, they’ll most likely end up paying the lender’s SVR. This could see their mortgage payments soar by 30% from one month to the next.”
