A history of the Mortgage Switch Guarantee
The Mortgage Switch Guarantee is a set of proposals to improve the way lenders communicate with their customers. But where did these come from?
May 2017: Mortgage Saver Review published
Trussle – the UK’s first online mortgage broker – launched the inaugural Mortgage Saver Review (MSR) which looks at problems across the mortgage market. The report sought to uncover why so many borrowers are failing to stay on top of their mortgage and how brokers and lenders could improve the mortgage experience.
The findings uncovered a range of issues preventing borrowers from switching to a more suitable deal, known as switching inertia. It also found that UK homeowners are collectively wasting £10 billion by not being on the most suitable mortgage. This finding was the catalyst for Trussle working with industry and government to make mortgages fairer for borrowers.
July 2017: Mortgage Switch Guarantee white paper
Having spoken with senior mortgage industry and government influencers to understand the contributing factors to switching inertia, Trussle produced a white paper to drive the conversation around the concept of a Mortgage Switch Guarantee. This would mirror successful efforts in the energy and current account markets. However, homeowners would stand to gain up to ten times more in savings switching their mortgage.
The paper outlined five initial recommendations designed to offer mortgage borrowers much needed support:
Standardising and simplifying the way mortgages are priced and presented to customers
Improving lenders’ communication with customers when prompting borrowers to switch
An obligation for lenders to offer new deals to customers who are ‘mortgage prisoners’
A mandate for all mortgage brokers to have access to all deals on the market
Modernising a range of slow and outdated processes when it comes to switching
Once launched, Trussle spoke with homeowners, Government, and the wider mortgage industry about these proposals and how to refine these for greatest impact.
February 2018: Second Mortgage Saver Review published
Trussle’s second report looked at the lack of transparency around pricing in the mortgage market. Their research found that borrowers are resoundingly in favour of advertised mortgage deals displaying the True Cost – the total cost of the mortgage including all fees, repayments, and incentives.
Through the industry, mortgage deals are presented in a variety of ways. Yet the key focus is always on the headline interest rate. Unfortunately, this rate rarely indicates how competitive the deal really is compared to others.
This table now shows the top ten lenders above when ranked by True Cost, taking into account all the associated fees and incentives. See the difference.
The recommendations were discussed by Trussle’s CEO Ishaan Malhi on BBC News highlighting the need for more transparency on mortgage lending criteria.
September 2018: Further defining the Mortgage Switch Guarantee
In late 2018, Trussle took the learnings from their conversations and research to define the MSG principles as it stands today:
Contact borrowers three months before their initial rate period ends, electronically and by post
Show borrowers key mortgage information online, or via SMS messages
Display the True Cost of a mortgage’s initial rate period
Now we are seeking your support; for those who have had enough of lenders complicated jargon, obfuscated fees, and charging customers a “loyalty penalty”. We need commitments from the mortgage industry to change and to empower homeowners to take control of their mortgage.