New research shows that 75% of borrowers who are not remortgaging their current mortgage deal could be missing out on the opportunity to pay less for their home loan. By not shopping around, three-quarters of homeowners including those with new homes could be paying, on average, nearly three thousand pounds more than is necessary over the lifetime of the loan.
The research by YouGov and a leading provider of mortgages also found that those with mortgages were twice as likely to change who supplies their energy rather than change their mortgage provider. Yet, changing their energy provider would only save homeowners £200 whereas changing their mortgage provider would save £2,800.
This is Money reports that a homeowner who has borrowed £150,000 for their mortgage over a period of 25 years on a lender’s standard variable rate of 4.5% would pay approximately £833.75 per month. Yet, remortgaging at a fixed rate of 1.84% over five years would result in monthly payments of £624.16. That’s a saving of over £200 each month.
Ishaan Malhi from Trussle, an online mortgage broker, says it is shocking that almost three-quarters of borrowers have never switched providers to get a better deal. He says: It’s especially shocking that by failing to make the most of the lowest rates available on the market, so many UK households are basically throwing thousand of pounds away each year.”
When mortgage borrowers were asked the reasons for not remortgaging with another lender, one in five said they thought the actual process would be “too much hassle” with another 14% saying it would be “too complicated”. Meanwhile, one in seven thought if they switched their mortgage provider they would be penalised for doing so. Only 7% said loyalty was why they stayed with their current provider.
Andrew Montlake, who is a mortgage provider, said: “People still believe it’s a real hassle to go through remortgaging or that it will be difficult as well as expensive to do so, when, in reality, it’s really not the case.”
Many lenders actually offer financial incentives to switch and help with the process of remortgaging. You’ll find a remortgage package of some kind offered by most lenders, which involves them paying the legal and valuation fees that come with switching. If you’re not making any changes to the sum you’re borrowing or the loan terms, then underwriting can be very straightforward. The underwriting process has also improved with technological advances that have come along as well as a mortgage broker often assisting with the paperwork.
Daniel Hegarty from Habito commented: “We’re seeing the emergence of new technology such as FinTech, which gives consumers more clarity about their financial situation and returns control to them. With mortgage rates at record lows, no borrower should be staying on a SVR [standard variable rate] mortgage.”