Almost one in three borrowers are paying too much for their mortgage.
A new report by the Financial Conduct Authority says that around 30% fail to find the cheapest mortgage.
The FCA said there is also “no easy way” for consumers to be confident that they would qualify for a mortgage – and that this stops them shopping around.
The FCA’s report also looked at the plight of so-called mortgage prisoners who cannot switch to a better deal.
Christopher Woolard, executive director of Strategy and Competition at the FCA, said: “There are 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.
“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 that we do not return to the poor practices of the past.”
The FCA also said that it is seeking to make it easier for borrowers to weigh up the strengths of different mortgage brokers and is planning to work with the broker sector to develop metrics to help consumers compare intermediaries.
Ishaan Malhi, CEO and founder of online broker Trussle, said the FCA’s Mortgage Market Study could not have come at a more crucial time, with “so many home owners finding it difficult to compare deals, unnecessarily over-paying interest, or trapped on Standard Variable Rate deals”.
Speaking to EYE, Ayse Zuhdu, a senior broker at Mortgage Chain, said borrowers often wrongly believe that remaining with an existing lender will give them a preferential rate.
She explained: “I often hear people say they are happy to just stay with the lender that they bank with, as they believe being a ‘loyal customer’ will get them preferential rates. This is mostly not the case.”
Zuhdu said it is important to recognise the issues that certain borrowers face, including those who are self-employed.
“Sometimes consumers will not obtain the cheapest rate available, simply due to their criteria not fitting with that lender.
“An example of this would be someone who is self-employed and just starting out. Some lenders need an applicant to have at least three years of accounts, while others will take just one year.”