As research reveals that many homeowners could be overpaying on their mortgages, estate agents Tepilo explain the benefits of shopping around for the best rate.
People are often reluctant to change mortgages, but homeowners could be missing out by not doing so.
That's according to research by L & C Mortgages, which has found that more than a third of homeowners are still on a Standard Variable Rate mortgage (or SVR), despite these rates typically being higher and more expensive.
What's more, if interest rates were to rise from the current historic lows of 0.25% - as the Bank of England has frequently intimated they might – then the 4 million people in the UK with an SVR mortgage could see their mortgage payments go higher still.
As well as the 4 million homeowners with an SVR mortgage, L & C Mortgages also warns that a further 1.1 million households are wasting approximately £2.78 billion by sitting on the wrong type of mortgage deal.
The research found that, by switching to a more favourable mortgage deal, homeowners could save £216 each month (or more than £2,500 annually).
Despite this, 58% of homeowners have never remortgaged to save money. This is even more surprising – and worrying – when you consider that inflation is currently at its highest level since 2013, the cost of living is rising, energy prices are on the increase and there is still the threat of interest rates rising in the near future, which would make mortgage repayments more expensive for certain homeowners.
Even more worrying, perhaps, is the revelation that 3.4 million households are totally oblivious to what the current interest rate of their mortgage is, which means many could be paying over the odds when they don't need to.
With mortgage rates at historic lows, borrowing money has never been cheaper, but many people are still paying more than they might need to. SVRs are not the cheapest rates available on the market, and by not scouting around for better deals – through fear it will be too much hassle, too difficult or too risky – homeowners are missing out.
The research found that many people believe they are paying too much on their mortgages, but there is a reluctance and a hesitancy to upset the apple cart. People are unwilling, or unaware of the possible benefits, of taking decisive action and switching mortgages.
While we are happy to regularly switch providers for our energy, phones, insurance and broadband – and often consider changing banks or gyms – we seem far less willing to save money by remortgaging.
The hesitancy is understandable, but if money could be shaved off mortgage repayments by shopping around for a better deal, it is something that homeowners should definitely consider. It's recommended that, as a homeowner, you regularly review your mortgage to ensure you are getting the best deal possible. If not, it may be time to switch. If you're unsure about any of this, there is advice and information out there – from mortgage advisers and dedicated websites – to help you on your way.
The study also looked at the UK regions that are overpaying the most on mortgages. London tops the list, with an average monthly overspend of £266. In the Midlands and the South of England, homeowners collectively overspend by £222, while in the North of England those with mortgages are paying out £201 more than they need to.
Mortgage repayments are likely to be a homeowner's biggest monthly outgoing, so it literally pays to get the best deal possible. With record low interest rates still available on the market, there are plenty of potentially inviting alternatives for those who take the plunge.