Better the lender you know?

24 May

Our CEO, Lee Flavin, shares his thoughts on customer loyalty and obtaining better rates with your current mortgage provider

I called Sky last weekend in an attempt to reduce my monthly bill, which recently increased from £49 to £108 (ouch!) due to my 12-month ‘new customer’ deal coming to an end.

It proved to be a worthwhile call which lasted no longer than 15 minutes and concluded with them offering up (and me accepting) a loyalty discount for the next 18 months, cutting my bill to £67.

I’m the type of consumer who usually goes with the option that presents the least hassle, providing I’m not getting my pants pulled down in the process. I’m now paying much less than I was and I’ll not have to think about it again for another year and a half, so I’m happy.

Sure, I could have ‘kicked off’ and taken my business elsewhere, but why bother? I quite like my Sky package, so staying with them on improved terms makes sense – there’s no form-filling, no contract to sign, no installation date to be booked etc.

But let’s face it, if I hadn’t called them, they wouldn’t have called me.

RateSwitch was officially launched in February to help complacent or uncertain homeowners switch to better mortgage rates through their current lender. It’s estimated that well over a third of homeowners pay interest at their lender’s Standard Variable Rate (SVR), which is the uncompetitive default rate to which most initial fixed and tracker deals automatically revert.

Sound familiar? It’s a very similar business model to Sky and lots of other subscription-based services, except on a much larger scale.

The idea was conceived almost three years ago, with a view to primarily support:

(a) Apathetic borrowers,

and

(b) ‘Mortgage prisoners’ – i.e. those who are unable to remortgage between lenders to achieve a better rate due to a notable change in their circumstances (employment, income or credit rating) since originally taking out their mortgage.

We believe these two very different consumer types largely contribute to the UK’s SVR population.

Apathetic borrowers

We live in an era of price comparison where obtaining the very best deal available and ‘shopping around’ is often seen as the norm.

But having arranged mortgages day in, day out, for well over a decade, I’m confident this is not always the case.

More often than not, apathetic borrowers aren’t truly apathetic. They’re just really time-poor, like so many of us.

Rate switching through your current mortgage lender is generally a very quick end-to-end process. In some instances, we’re able to execute rate switches from start to finish as a same-day transaction.

Mortgage prisoners

Switching mortgage lenders isn’t always as straightforward as changing your TV package from Sky to Virgin, your mobile phone from EE to Vodafone, or your gas and electricity from British Gas to Npower.

If remortgaging was a sure thing, there wouldn’t be approximately 4 million people sat on expensive SVRs. Of the estimated 11.1 million residential mortgages in the UK, 0nly 384,200 remortgages were completed in 2016, which equates to less than 3.5%.

Genuine mortgage prisoners (some believe they are, but they’re actually not) usually have less options available to them, but this doesn’t mean they don’t have any.

Unlike remortgaging between lenders, rate switching through your current one rarely involves the intervention of a credit check or underwriting assessment, so typically, it’s a very streamlined process.

To this effect, we’re able to facilitate a realistic and compliant solution for homeowners who have been ‘stuck’ in their current position for far too long.

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