Research has revealed that more than a third of homeowners are still on a Standard Variable Rate mortgage (SVR), despite rates on this type of mortgage typically being higher.
If interest rates – which are currently set at record lows of 0.25% - were to increase, as the Bank of England has hinted they might, the 4 million people who currently hold SVR mortgages could see their payments go up higher still.
What’s more, a further 1.1 million households are potentially wasting £2.78bn by sitting on the wrong mortgage deal.
People are often reluctant to change mortgages, even though they could be saving money by doing so. By changing to a mortgage with a better rate, borrowers could be saving hundreds on their monthly mortgage payments, but a lack of awareness, concerns over how easy it is to switch mortgages and worries over how much hassle and stress switching mortgages could cause is preventing people from taking the plunge.
Despite research showing that UK homeowners could save £216 each month – or more than £2,500 a year – by switching to a better deal, 58% of borrowers have never remortgaged to save money.
Given the recent news that inflation is on the up – reaching a three-year high of 2.3% in mid-March – the lack of remortgaging is a cause for concern. It’s not just inflation that is on the rise, energy prices have also been increasing after a period of freezes and there is still the threat from the Bank of England that interest rates will be upped at some point as well. All of this makes the cost of living – and, if interest rates were to rise, the cost of mortgages too – that bit higher.
With household budgets squeezed, it therefore makes perfect sense for borrowers to seek out a more favourable mortgage deal, especially if the money being shelled out elsewhere – on higher energy bills, food costs and petrol prices – is on the up.
Staggeringly, recent research has also revealed that some 3.4 million households aren’t aware of the current interest rate of their mortgage, a situation that means many borrowers could currently be paying well over the odds.
Even though cheaper rates are available, people are sticking to SVRs and not even considering a remortgage to secure a better deal. In many cases, this means borrowers are overpaying when they don’t need to.
It’s an issue that is particularly acute in London, with borrowers overspending by an average of £266 a month, or £3,193 a year, by sticking to an unfavourable mortgage deal. By browsing the market for better rates, borrowers in the capital could be saving themselves plenty.
For most homeowners, mortgage repayments are likely to be the biggest outgoing each month, so it makes sense for people to regularly review their mortgage to see how the rates they pay stand up to the rest of the market.
At a time of record low mortgage rates, now is as good a time as any to seek a better deal. We’re happy to switch energy providers, mobile providers and internet providers with abandon, but it seems many of us are much less willing to do the same for our mortgages.
At Kings Group we offer a mortgage service that is provided by Kings Group LLP, an appointed representative of Openwork Ltd. Whether you’re a first time buyer, a current homeowner looking to remortgage or a buy-to-let landlord, our services are available to you.
We have expert mortgage advisers on hand to help you find the right mortgage product for your needs, examining your situation in great detail to ensure you are getting the best possible deal. Meetings can be carried out face-to-face or, if preferred, over the phone.
We offer a wide range of mortgage products, from ones focused on remortgages to arrangements for those with an interest in buy-to-let.
For more information about what we offer with regards to mortgages, please click here.
If you would like further guidance on buying or selling a property in North London, East London, Hertfordshire or Essex, we would be delighted to help.
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