The seven day proposal applies to the whole of consumer services and the government will meet with industry bodies in the coming months to discuss how it could become a reality.
The government plans to introduce seven day mortgage switching between providers to help consumers get a better deal.
The seven day proposal applies to the whole of consumer services and the government will meet with industry bodies in the coming months to discuss how it could become a reality.
The government said there is no consistency in how long it takes for consumers to switch and in a call for evidence it found that 60% of consumers weren’t able to switch as quickly as they wanted to.
Currently it takes mortgage providers around four to six weeks to switch, making the seven day target more ambitious than with current accounts and mobile phones which already meet the seven day standard.
Alan Cleary, chief executive of Precise Mortgages, felt the seven day timeframe should only apply to retail banking and accused the government of ignoring the facts about the vibrancy of the mortgage market.
He said: “The assertion is that mortgages need to be lumped in with retail banking where customers don’t switch often enough.
“But the mortgage market is alive and kicking. Customers move around at will so there’s no need for this – the government is creating a problem that doesn’t exist.
“Around 60% of the buy-to-let market is remortgages and in the residential space 30%.
“The government should drop the proposal for the mortgage market and instead focus on bank accounts.”
Mortgage broker Mark Harris, chief executive of SPF Private Clients, wasn’t convinced and reckoned a seven day switching standard would result in higher mortgage rates and steep early repayment charges.
He said: “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 AVMs (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.”
East-London mortgage broker Jonathan Burridge reckoned seven day mortgage switching is possible.
However he felt it would favour the big providers and questioned whether such a standard would be good for consumers.
He said: “Why do we need it down to seven days? Shouldn’t we focus on improving the process rather than speeding it up?
“The technology is there and it could work at a low loan-to-value and for people with a good credit file.
“However the Prudential Regulation Authority would be concerned about lenders acting appropriately and prudently in that timeframe.
“Is it possible in seven days? Yes. Would it benefit anybody? No.”
Burridge reckoned that as is stands major lenders offering exclusive legals are in the best position to meet the seven day timeframe which would widen the divide between providers.
He added: “Smaller building societies wouldn’t have the infrastructure to offer it.
“Would it increase the share of the big eight and therefore reduce competition?"
Andy Knee, chief executive of LMS, welcomed the consultation but reckoned lenders and conveyancers need to work closer together to make it happen.
He said: “The government’s decision to launch a consultation on expedited switching between lenders is a welcome initiative towards creating better choice; improved competition and convenience for remortgage customers.
“New timelines for switching will provide further incentive for remortgagors to intelligently capitalise on historically low interest rates and make substantial savings.
“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.”
