A recent look at the market has found that a third of borrowers are paying over £2,500 extra by not being on the ball when their mortgage entry rate runs out.
Remortgaging is an important aspect of being a homeowner, one which can save you a lot of money, but it would seem, according to comparison site uSwitch.com, that people aren’t shopping around to change, and so are losing money compared to those that do.
For 21 months, homeowners tend to stick with the standard variable rate that their mortgage defaults to after their mortgage entry deal times out. In this time, it can end up costing £2,445 more than if they had switched to a better deal immediately.
Standard variable rate mortgages (SVR) are the basic mortgage rates of the lender. Many SVRs are rising, despite the Bank of England keeping the base rate for the country at 0.5 per cent.
It means that people who don’t look into their mortgages, and actively seek out better deals may end up paying a lot more on interest than a savvy owner who switches things up and stays on the better deals.
However, even when switching mortgages, you have to be careful. Just because a mortgage deal has a lower interest rate doesn’t mean that it is better. A lower interest rate may come with a longer mortgage term, meaning you could end up paying the mortgage off for longer and even pay more over this longer time. Furthermore, deals with lower interest rates may come with charges for things like making payments early, or changing deals, limiting your freedom in the future.
If you have been a home owner for two to five years, and you originally bought into a mortgage which had a special interest rate (these deals normally have a lifetime of two or five years before they automatically change to the bank’s default mortgage rate) then you need to make sure you shop around and see if there is a mortgage out there which is right for you and can save you money.
