The Mortgage Saver Review - Feb 2018
At Trussle, we believe that everyone should love their journey of owning a home. It’s why we’re committed to improving the areas of the mortgage journey that negatively impact borrowers the most. The second volume of our Mortgage Saver Review examines and presents solutions to key issues, supported by our own proprietary data and analysis.
Ranking mortgage deals by true cost will help borrowers compare deals more effectively
Throughout the industry, mortgage deals are presented in a variety of ways. Yet the key focus is almost always on the headline interest rate. Unfortunately, this rate rarely indicates how competitive the deal really is compared to others.
The following table shows the ten lowest two-year fixed rate deals on the market from 72 lenders, as of 5th January 2018.
The next table below shows the top ten, after we re-rank the same 72 deals by true cost, accounting for fees and incentives. See how some of the lowest-rate deals now rank further down the table.
We’re calling for industry-wide adoption of sorting deals by ‘true cost’ to provide a more accurate reflection of its cost over the full initial period.
Eliminating switching inertia could save UK homeowners almost £10 billion collectively
Some of the biggest hurdles faced by existing borrowers include complicated jargon, poor and inconsistent communication from lenders and brokers, and a negative first-time mortgage experience that discourages them from remortgaging when it’s time to do so.
We now know that all of these issues contribute to ‘switching inertia’, collectively costing approximately two million homeowners almost £10 billion a year - equal to the annual cost of all online fraud in the UK. For the average borrower, the difference between a market-leading deal and the average SVR is around £4,700 in extra interest each year.
A Mortgage Switch Guarantee would drastically improve the financial wellbeing of millions of families
Last year, Trussle called for a Mortgage Switch Guarantee to address the issues shown within this report. The proposals included improving the way that lenders communicate with customers when it’s time to switch, and simplifying the way that deals are displayed for fairer comparison.
We’ve since engaged lenders, policy makers, and the regulator to discuss how best to launch a Mortgage Switch Guarantee. I’m confident the data, insight, and arguments within this report give further credence to the cause and ultimately will help us create a better future for borrowers.