Three-quarters of homeowners paying £2,800 a year too much on their mortgage

Posted 2 December 2016

The vast majority of mortgagees have stuck with their home loan and missed the opportunity to pay much less via a remortgage...

Millions of homeowners in the UK are paying thousands of pounds a year more than they need to because they have failed to shop around for the best mortgage.

That's the conclusion of new research which has found that three in four homeowners have remained with their current lender despite the fact that switching their mortgage could save them thousands of pounds over the lifetime of the loan.

A YouGov survey has revealed that mortgage holders were twice as likely to switch their energy supplier than their mortgage. Research by YouGov and a leading mortgage broker has revealed that three-quarters of British homeowners have stuck with their current mortgage lender despite the fact that remortgaging could save them an average of £2,800 a year.

The research also found that consumers were twice as likely to switch their energy supplier, despite the fact that the average saving for doing so was just £200 a year, compared to £2,800 a year for switching mortgage lender.

This Is Money reports that a borrower with a £150,000 mortgage over 25 years on their lender's standard variable rate of 4.5% would pay £833.75 per month. Remortgaging to a five-year fixed rate at 1.84% would see those payments fall to £624.16 per month - a saving of over £200 per month.

Ishaan Malhi from online mortgage broker Trussle says: "It’s shocking that almost three-quarters of mortgage borrowers have never switched provider in search of a better deal. Especially as households across the UK are throwing away thousands of pounds every year by failing to take advantage of the best rates on the market."

When asked what had stopped them from remortgaging to another lender, one in five borrowers said that they thought the process would be “too much hassle” while 14% said it was “too complicated”. One in seven said that they believed they would be penalised if they did switch lender and just 7% said they stayed with their current provider out of loyalty.

Mortgage expert Andrew Montlake, remarks: "There is still a perception out there that it is a real hassle to remortgage or that borrowers will find it expensive and difficult to do so, when actually this is not the case."

Many lenders help with the remortgage process, offering financial incentives to switch. Most lenders offer some sort of 'remortgage package' where they will meet the valuation and legal fees incurred in switching and underwriting can be straightforward if you're not making any changes to the amount you borrow or the term of the loan.

Advances in technology have also improved the process, and if you ask a mortgage broker to help you they will often assist with the paperwork involved.

Daniel Hegarty from Habito adds: "With the advent of FinTech, we’re seeing new technology emerge that returns control to consumers while creating clarity about their financial life. With mortgage rates at historic lows, nobody should be sitting on an SVR [standard variable rate]."

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