Friday 24 March 2017

4 Million Families Wasting £266 Every Month For Just A Single Mistake


Over a third of homeowners in the UK are currently sitting on the wrong mortgage deal - and it's costing families £2.78billion more a year than they should be shelling out.

New figures by L&C Mortgages show that over 4 million households are currently on a Standard Variable Rate mortgage (SVR) - the rate set by a mortgage lender after a borrower completes an introductory offer.

This means that if interest rates rise - as the Bank of England has hinted could happen - all 4 million customers could see their payments rise further, in line with their mortgage lender's rates.

L&C's investigation found that by switching to a better deal, UK homeowners can save £216 each month or over £2,500 annually.

The figures come as over half (58%) of homeowners admit they've never re-mortgaged to save money.

That is particularly worrying given the recent news that inflation is at its highest point since June 2014, energy prices are on the up and there is the potential for interest rates to rise as well.

In addition, L&C discovered that 3.4million households don’t know the current interest rate of their mortgage, highlighting just how many people could be paying over the odds.

David Hollingworth from L&C Mortgages said: "’It’s worrying to see so many people still on a Standard Variable Rate mortgage as they are not the cheapest rates available.

"Not only have we found over a third (36%) of homeowners are on their bank or building society’s standard variable rate, but 3.4million people don’t know their mortgage rate – the chances are they could potentially save hundreds or even thousands of pounds a year by re-mortgaging to a new deal."

L&C also looked into the UK regions who are overpaying the most and unsurprisingly London tops the table with an average monthly overspend of £266. - despite house prices in the capital the highest in the country.

The south of England and the Midlands collectively overspend by an average of £222 and the North is paying £201 more than they should be.

How and when to remortgage: Expert tips

Shop around and speak to a broker

When setting out on your mortgage journey, don’t be influenced by loyalty to one bank. There are a vast number of lenders in the market offering very different products to suit borrowers with very different requirements.

Make sure you fully understand what’s out there before jumping into one deal. The difference between 1.99% and 2.99% that your bank might be offering may not sound much, but on a 250k mortgage over 3 years this is £4,500.

If you're unsure, an independent, whole of market broker not tied to a particular lender can help you compare a wide range of deals to suit your needs. Taking advice when remortgaging makes sense, as an expert will help you find the best deals in the market and advise you on how much you stand to save.

Approach your current lender

Once you’ve found a new mortgage deal, it’s worth giving your current lender a chance to match the terms, even if it's advertised products are inferior. It may be keen to fight to keep your business.

Use technology to your advantage

Millions of people in the UK are currently on a standard variable rate, because they don’t keep track of their mortgage payments in the same way that they monitor day-to-day spending.

Using apps such as Momentum Moneyhub , which allow you to view all your finances in one place and track these over the longer term, is a handy solution to this problem.

Don’t leave it until the last minute

Switching mortgage is getting quicker, but traditional routes can still take several weeks. Borrowers should give themselves sufficient time to consider their options, so that they can avoid moving onto a Standard Variable Rate during the process.

Don’t wait until a week before your fixed term ends before taking action. Start looking around 14 weeks before your rate ends.

Do your homework

Before speaking to any lenders or brokers, it's good to do some research; What’s the current base rate? What mortgages are currently available? What are commentators saying about interest rates?

Having even a small understanding of the bigger picture can help you make a more informed decision.

Remember, if you are tied into an initial deal then you might have to pay an early repayment charge which can be huge, often 2-5% of your outstanding loan - in these instances, homework is crucial.



Etiam at libero iaculis, mollis justo non, blandit augue. Vestibulum sit amet sodales est, a lacinia ex. Suspendisse vel enim sagittis, volutpat sem eget, condimentum sem.