13th August 2019

Online lender Habito offers 4 months’ notice to alert customers when to switch mortgage

Habito, the UK’s first online mortgage broker and lending platform, has unveiled plans to tackle the issue of British homeowners paying over the odds from lapsing on to their lender’s standard variable rate (SVR) by launching its four-months’ notice pledge – a commitment to ensuring all its customers have adequate time to switch their mortgage prior to their fixed-rate deal ending.

Habito research found that 55 per cent of mortgage holders could save nearly £300 per month by switching, equating to £15.5bn across the nation every year. In most cases, a lender’s standard variable rate is typically somewhere between 4.24 per cent and 4.99 per cent meaning that someone paying off their mortgage at a rate of somewhere between 1.89 per cent and 2.29 per cent during their fixed term could see their monthly payments jump by up to a third when they move on to the lender’s SVR.

By signing their mortgage terms and conditions, a mortgage-holder acknowledges that their introductory rate is for a fixed period of time only and that it's up to them to remortgage to a competitive rate, or do nothing and lapse onto paying their lender’s higher SVR rate. However, Habito’s research showed that 67 per cent of people do not read their mortgage contract to the end, meaning many are unaware that the onus is placed on them to switch in time.

Daniel Hegarty, Founder and CEO of Habito, said: “We’re calling for mandatory communications notices from all mortgage lenders and banks starting at four months prior to the initial period ending, and across email and text. As is so often the case in traditional financial services, loyalty is penalised rather than rewarded. The longer you stay with the status quo, the more you pay. People deserve better than that – they need the right information about their mortgage, given at the right time, to make the right choice on what’s best for them.”

“We strongly believe we have a duty of care to our customers to ensure that whoever their mortgage lender is, we help them avoid the trap of spending more than they should on their mortgage. It can take anywhere up to 8 weeks for a remortgage to complete so if a customer is only notified the month before the end of their deal, they’ll most likely end up paying the lender’s SVR. This could see their mortgage payments soar by 30 per cent from one month to the next.”

Habito issues text message alerts and emails to its customers with four months to go on their current deal, notifying them of its end date and next steps for preparing to switch their mortgage. Before this, as a Habito customer reaches the final 12 months of their fixed term, Habito also sends customers using Google and Outlook, a calendar notification that they can use to diarise the four months’ notice date in their diary.