Saturday, May 15, 2021
Finance

Mortgage loyalty penalty costing homeowners £1k extra a year

homeowners

Citizens Advice is warning that the burden is falling on the consumer to get the best deal and those who do not switch are at risk of paying extra sums of money for their mortgage

Two fifths (42%) of people whose fixed-term mortgages have ended since the start of the first lockdown in March 2020 have taken no action to switch, according to Citizens Advice.

The charity fears these homeowners could be paying a loyalty penalty for sticking with their existing provider.

The Financial Conduct Authority (FCA) has estimated that not switching could leave loyal mortgage customers charged an average extra £1,000 a year in bills.

Citizens Advice is warning that the burden is falling on the consumer to get the best deal and those who do not switch are at risk of paying over the odds for their mortgage. The charity network said its research suggested that disabled people and carers were more likely to see a price rise at the end of their mortgage contracts than the general population.

The research also found that one in five (21%) mortgage customers who did not switch said the process was too time consuming or difficult.

Many have also been unable to switch due to circumstances outside their control, such as mental or physical ill health and additional pressures caused by the pandemic.

Alistair Cromwell, acting chief executive of Citizens Advice, said: The pandemic has had a devastating impact on household finances. While the FCA acted fast to protect mortgage customers from the more immediate impacts of the pandemic, many will be facing long-term financial difficulty in the months and years to come.

As the pandemic continues to take its toll on our finances, employment, health and relationships, it’s more important than ever that customers aren’t penalised for not switching. As Covid support schemes come to an end, tackling the loyalty penalty is one way that regulators can protect consumers from unfair and unnecessary costs, Cromwell said.

Citizens Advice surveyed more than 3,400 people in August 2020 and carried out additional work with more than 900 in September 2020.

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