The UK's mortgage market is worth an extraordinary £1.3 trillion, but new research suggests a third of home buyers are failing to find the best deal for them.
The Financial Conduct Authority (FCA) said while many people looking to secure a mortgage find the lending market works well for them, a significant number of home buyers and homeowners looking for a remortgage are out of pocket because they are on a more expensive deal than they need to be.
In its interim report into the UK mortgage market, the FCA said long-standing borrowers, many of whom took out their mortgage before the 2008 financial crisis, are now stuck in expensive deals, making them "mortgage prisoners". Meanwhile, a "significant minority", said to be up to 30 percent of all those with a mortgage, are paying too much because their loan isn't appropriate for their needs.
Making it easier to identity right products
Its report makes a number of proposals, including:
- Making it easier for consumers to identify the right mortgage products for them;
- Removing barriers that stop lenders being more innovative in how they sell their mortgages;
- Making it easier for consumers to assess individual mortgage brokers;
- Help long-standing borrowers who cannot switch, particularly those who are up to date with their payments but took out their loan before the financial crisis.
Christopher Woolard, director of strategy and competition at the FCA, said: "The mortgage market is one of the largest financial markets in the UK, and there have been significant changes to the market since the financial crisis in order to ensure we do not return to the poor practices of the past.
"For many the market is working well with high levels of consumer engagement. However, we believe things could work better with more innovative tools to help consumers.
"There are also a number of long-standing borrowers that have kept up-to-date with their mortgage repayments but are unable to get a new mortgage deal; we want to explore ways that we, and the industry, can help them."
Market ‘working effectively' for majority
The FCA will now carry out a consultation on its interim findings and publish a final report by thr end of this year.
UK Finance, the trade body that represents UK lenders, said they believed the findings of the interim report confirmed that the mortgage market is "working effectively for the vast majority of borrowers".
Jackie Bennett, director of mortgages at UK Finance, said: "The industry is committed to lending responsibly and ensuring that competition in the market works to the benefit of all customers.
"We note the FCA's points regarding perceived areas of weaknesses within the market, particularly around customers who currently may be unable to switch products. We will be working through the FCA's recommendations and continuing to engage closely with the regulator over the coming weeks as we respond to the consultation."