Borrowers could be allowed to switch their mortgages in seven days, under new plans being consulted on by the Government.
It has called for evidence to find out how long it takes people to switch providers across a number of markets, including mortgages.
The Government will meet with industry bodies to discuss the plan, which is part of the incoming Digital Economy Bill, over the coming months and the proposals could be in place by next year.
Business secretary Sajid Javid says: “I want to give consumers more power over switching providers for the services they rely on to make sure they are getting the best deals. The government is committed to creating a system that works for consumers and makes markets more competitive.
“At the moment the time it takes to switch depends on which service you are switching. I want to hear what consumers and businesses think of making switching quicker and more consistent across all markets.”
SPF Private Clients chief executive Mark Harris say the idea would be difficult to read across for mortgages.
He says: “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.
“Under the proposals, not only will 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. This will be less of an issue on lower loan-to-values as automated valuation models are available. The latter would have to become more commonplace in order to make a seven-day switch achievable.
“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.”