We all know that we should be switching financial products for a better deal, potentially saving ourselves thousands of pounds a year. But do we have time to do this?
Certainly some products are easier and less time-consuming to switch than others. Gocompare.com questioned people who have shopped around for financial products in the last month about their experience. It found that home insurance, car insurance and ISA or savings accounts are the easiest financial products to switch.
Mortgages came bottom of the list, after broadband and phones, with only six out of ten saying they found switching their mortgage easy. But that’s still the majority, and as a mortgage is the biggest financial commitment that most of us take on in our lifetimes, we must devote time and energy to getting the best deal.
Yes, interest rates are at rock bottom, but this doesn’t mean that you’re getting a good rate. Too many borrowers are lingering on their lender’s standard variable rate (SVR) – and Bank of England figures show these have been nudging up slightly. Don’t be under the illusion that an SVR tracks above the Bank of England Base Rate at a set percentage. The rate you pay will be determined by your mortgage lender, which can set a higher SVR for longer standing borrowers in order to entice new customers in on a market leading fixed rate.
Some obstacles in the path of a potential mortgage switcher come from the tougher lending rules which came into effect in April 2014. These require lenders to assess the affordability of a mortgage by looking at would-be borrowers’ overall financial health as well as their earnings. It’s normal to be asked for current account statements, credit card and personal loan details alongside your payslips for the past three months.
Alongside borrowers, other banking customers should be getting active about their money too.
Since 2013, the Current Account Switch Service (CASS) has made the whole process of moving bank easier. Switch through the CASS, and it should take no longer than seven working days to get your new account.
According to Moneywise’s Customer Services Survey of almost 25,000 financial consumers earlier this year, the CASS is working pretty well. It hasn’t completely eliminated problems when changing account, but it has cut them substantially.
Our survey found that for every 100 people who switched current account more than 10 years ago, 33 had some small problems when they did so. But in the past three years, just 20 people per hundred had some problems getting a new account.
Around one in 20 people said they have switched current account in the past year or so, with a third of switching to either Santander or First Direct, albeit for quite different reasons.
Santander’s flagship 123 account with its cashback on household bills and interest of up to 3 per cent on balances of up to £20,000 is a big draw. However, fees on the 123 account rose from £2 a month to £5 a month in January, which many customers didn’t like. One said: 'I would be completely happy if it wasn’t for the increased monthly account fee.'
First Direct, meanwhile, tempts new customers with the prospect of £100 cash, but it’s the customer service that keeps people from leaving. It’s hard to put a cash value on customer service, but First Direct’s must be worth at least £100, as that’s what it will pay you to leave if you're not happy.
Moira O’Neill is editor of Moneywise and moneywise.co.uk