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Trade body raises product switching concerns

Samantha Partington
Written By:
Samantha Partington
Posted:
Updated:
16/02/2015

The Council of Mortgage Lenders (CML) is concerned that the Mortgage Market Review (MMR) has created an unnecessary barrier for homeowners wishing to switch their mortgage to a cheaper rate.

Borrowers on a Standard Variable Rate who want to apply for new deal on similar terms are being held back by the tough new affordability requirements even if the switch can lower their monthly payments.

In its newsletter, the CML said it was preparing to address the issue with the Financial Conduct Authority (FCA) when it carries out a thematic review on the unintended consequences of the MMR later this year.

It said: “…we remain concerned about the level of bureaucracy in areas such as product switches.”

Ahead of the FCA’s review the CML has begun talks with members to find out which areas have proved most problematic to implement resulting in unintended consequences.

It emerged that lenders wanted clarity on what checks needed to be carried out if a borrower was switching to a new deal the mortgage balance increases slightly to take account of switching costs.

Currently lenders are subjecting borrowers to a full affordability assessment which many are failing to pass.

A spokesman for the CML said that while the MMR was not put in place to create mortgage business it should not create mortgage prisoners because of minor changes to their loan size.

He said it wants the FCA to provide more guidance in this area so lenders have the confidence to simplify the process for borrowers without the fear of falling foul of the rulebook.