CML reaction to BIS call for inputs on switching
Published: 25 May 2016
The Council of Mortgage Lenders notes today's call for evidence from the Department for Business, Innovation & Skills (BIS) 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.
The CML also notes that BIS specifically acknowledges that there are some major differences in the mortgage market compared with other markets covered in the scope of the call for evidence.
The CML would point out that:
- 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 - in combination, these may be harder to complete to a tight timescale than the processes needed in some other sectors.
- The mortgage market has recently been reviewed by the FCA and will itself already be subject to a targeted competition study in the fourth quarter of this year.
- 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.
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. If that is the correct interpretation, then many lenders would potentially already be operating to the 7-day timescale for completion.
Commenting on the call for inputs, 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.
Notes to editors
1. The Council of Mortgage Lenders' members are banks, building societies and other lenders who together undertake around 95% of all residential mortgage lending in the UK. There are 11.1 million mortgages in the UK, with loans worth over £1.3 trillion.