Over 1 Million Brits Could Be Overpaying on Their Mortgages
Mortgage applicants naturally seek the best possible deals, which for most means choosing lenders that offer the best introductory rates. Unfortunately, research suggests that a surprising proportion of home buyers do not realise that when their initial deal comes to an end, the mortgage is automatically switched to a standard variable rate (SVR) mortgage.
Banks and lenders are legally obliged to explain this caveat when organising and issuing mortgage contracts, though thousands are apparently unaware of the terms of their home loans.
A new study conducted by MoneySuperMarket suggests that a full 12% of mortgage payers have lapsed onto SVR rates by accident. This results in an average additional monthly repayment of approximately £133, with a typical SVR mortgage costing around 15% more than an introductory mortgage deal.
Worse still, among those who accidentally wound up on an SVR and found themselves essentially out of pocket, many claimed they were not made aware of the automatic switch at the end of their initial deal. The same study from MoneySuperMarket found that around 15% of all mortgage borrowers do not know that the transfer to an SVR at the end of the introductory period is automatic.
Switching Deals at the Right Time
In total, MoneySuperMarket estimates that around 1.3 million Brits could have lapsed onto an SVR mortgage, amounting to total collective added costs of more than £175 million per month. By contrast, those who switch to a better deal at the right time – i.e. prior to their introductory rate comes to an end – stand to save an average of £340 per year.
For those already tied into an SVR, the potential monthly savings increase to approximately £1,602 per year.
According to MoneySuperMarket, the importance of switching to a competitive deal at the right time simply cannot be overemphasised.
“Standard Variable Rates on mortgages are notoriously expensive and with 15% of those remortgaging being unaware of how they work, automatically lapsing onto them is a common and costly financial pitfall,” commented MoneySuperMarket’s Emma Harvey.
“Regardless of whether you’re on an SVR mortgage or another type, there could still be significant savings to be made when your initial mortgage deal comes to an end. In fact, we found that the average saving for mortgage holders still within their initial product period is £28.36 per month, which really adds up,”
“In order to stay on top of how much you’re spending on your mortgage, be aware of when your current mortgage deal is due to come to an end and start researching rates several months in advance,”
“You can arrange your new deal three months before the end date so that you switch over at the end of your initial term, ensuring you are always on the best deal.”
Independent Broker Support
If you are reaching the end of your introductory deal or believe you are paying too much on your current mortgage, we can help. You can contact a member of the team at UK Property Finance and we will conduct a whole of market search on your behalf, enabling you to find a more competitive deal and make on-going savings on the life of your loan. Along with this you can even use our UK mortgage calculator to work out the costs more accurately yourself.