The Financial Conduct Authority (FCA) says that lenders should do as much as they can to encourage mortgage borrowers to switch mortgages as the cost of living rises.

In a report released today, the regulator explains that, based on H2 2021 data, 74% of active mortgages – 6.3 million – are on fixed rate and, of those remaining – 2.2 million – half are on discount or tracker rates and half on reversion rates.

It adds that the number of borrowers who have switched when doing so would save them money has improved “significantly,” dropping from 800,000 in 2016 to 370,000 at the latest count.

And regarding those 370,000 mortgages (4% of borrowers), the FCA reckons the saving from switching to a two-year fixed rate with the existing lender would come to an average of £1,240 per year.

The breakdown of potential savings presents a wide spectrum, however: the regulator estimates that 110,000 borrowers would save less than £500 a year, another 110,000 would save between £500 and £1,000 a year, and 150,000 would save over £1,000 – all over a two-year term.

On a general basis, the FCA says: “We do not see the same poor pricing practices that used to be prevalent in the general insurance markets, where pricing was opaque and loyal customers could face dramatic price increases over time as a result of price walking.”

As well as encouraging lenders to be more pro-active, it also urges borrowers to ensure they understand their options; to consider whether switching to a lower rate fits their profile; and to engage with their lender or broker regarding this.

“We will continue to monitor the market, particularly given the impact on borrowers of increasing mortgage rates and the rising cost of living and consider what further steps we may need to take,” concludes the regulator.