As we’ve mentioned before, mortgages can be a complicated old thing to get your head around. There are a huge range of deals, products and choices out there, which means it can often be a bit of a minefield for people when it comes to choosing the right package.
Should you consider switching mortgage providers?
This uncertainty and confusion may lead to borrowers sticking to what they know or what they already have, even if better deals are available. New research from online mortgage broker Trussle has revealed that just over a quarter (28%) of mortgage borrowers in Britain have ever switched provider in search of a better deal.
The YouGov study, which spoke to more than 4,000 people, showed that mortgage holders were 63% more likely to switch energy provider than change their current mortgage lender. This comes in spite of the annual savings from doing so being much, much lower.
While changing energy provider can produce savings of around £200 a year, it’s nowhere near the same league as the £2,800 that the average UK household overpays by not browsing around for the best mortgage deal.
Back in August, the Bank of England finally changed the base rate for the first time since 2009, cutting it from 0.5% to a new historic low of 0.25%. The decision was taken to stimulate growth in the economy post-Brexit, put more money in the pocket of consumers and protect the housing market.
Low interest rates, of course, are good news for borrowers – particularly those with tracker mortgages (which track the Bank of England base rate).
Even though the move to lower interest rates triggered a surge of mortgage rate reductions from lenders, research reveals that millions of borrowers are failing to re-evaluate their current mortgage deal. In fact, a massive 94% of those surveyed said they hadn’t even considered changing to a better deal since the base rate was cut.
The study also found that people were more willing and likely to have switched car insurer (60%) and mobile phone provider (42%) than their mortgage lender, with one in five borrowers citing the hassle involved in switching lenders as their main reason for putting it off.
Meanwhile, 14% said the complicated nature of switching mortgages had stopped them in their tracks, while a further 15% said they hadn’t switched because they believed they would be punished for taking this step.
A much smaller number – just 7% - remain with their current lender out of loyalty.
Trussle’s findings also revealed some interesting location-specific data. For example, borrowers are at their most proactive in Scotland, where 41% of people have decided to switch mortgages. By contrast, only 29% of borrowers in the capital have switched deals. That’s still a lot higher than the Midlands, though, where just 16% of borrowers have shopped around for a better mortgage.
In many cases, failure to switch to a better deal – or to browse around for a deal in the first place – is down to a lack of awareness about what is out there and how to go about changing providers.
In many more cases, people simply don’t want to face the hassle and upheaval of switching. In the current environment, though, with mortgage rates at record lows, it’s a wise choice to reassess your current mortgage and work out whether you can get a better deal elsewhere.
Switching mortgage deals is not something that should be rushed, but there is no harm in browsing around every now and then to see what the latest deals on the market are. With interest rates so low, mortgage lenders are offering increasingly competitive rates – so, by sticking with the status quo, you could be missing out.
If you are unsure about switching mortgage providers, you can speak to a mortgage adviser or an Independent Financial Adviser for more information.