A new survey shows that mortgage lenders are taking homeowners for a ride. Here's how shopping around for a cheaper home loan could save you £1,500+ a year.
Thanks to apathy, confusion and ignorance, homeowners are wasting billions of pounds each year.
According to a new survey by Royal Liver (the UK's second-largest Friendly Society and owner of the famous Royal Liver building in Liverpool), half of all mortgage borrowers (50%) have never changed their mortgage provider. What's more, around two out of five homeowners (41%) claim that they will never switch. Blimey!
Although their loyalty is admirable, these homeowners are losing out on a packet. Indeed, the majority have no idea just how much this decision is costing them. Royal Liver's research which involved interviewing 2,000 adults - shows that four out of five homeowners (80%) believe that they are getting value for money from their current mortgage lender.
Sadly, the truth is that millions of homeowners are paying well over the odds, especially those who are paying their lender's standard variable rate typically 6.75% a year. With Best Buy fixed and discounted rates weighing in at roughly 4.75%, these people are paying around 2% a year more than they should be. On, say, a £75,000 interest-only mortgage, this means paying £1,500 of extra interest each year. Yikes!
However, many homeowners choose to ignore the massive savings that switching offers, simply because they find the subject of mortgages too confusing. Nine out of ten (90%) believe that shopping around for a mortgage could be made a lot simpler, with most people complaining that the jargon is the biggest hurdle.
For instance, although almost eight in ten of those questioned knew what endowment means, only two out of nine (22%) knew what a mortgage indemnity guarantee is. What's more, just one in eight (13%) knew what loan to value measures. These terms and many more are explained in our easy guide to money mumbo-jumbo: Your Financial Jargon Buster.
One worrying statistic from Royal Liver is that a quarter of homeowners (25%) would struggle if their mortgage rate rose by 2%. If mortgage rates do rise, more than half of those interviewed (52%) would cut back on discretionary purchases, such as holidays and cars. Only 11%, or one in nine, would rather slash their savings and investments. Guys and gals simply find a lower rate instead, because it's a lot less painful than cutting back!
Now, listen carefully at the rear! With around 8,000 different mortgages currently on offer and new deals being launched every day, there's sure to be a mortgage that's right up your street. Begin by asking your existing lender for a better deal and if it won't play ball, start shopping around.
Thanks to a number of web-based mortgage search tools, comparing home loans is far easier than it used to be. Also, check the Best Buy tables in the weekend papers and try looking on the BBC's Teletext service. If you're not yet comfortable with using the Internet to track down great deals, and would prefer one-to-one advice, try using a reputable no-fee mortgage broker, such as London & Country Mortgages.
Here's hoping that you find a happier home loan soon!
More: Check out the great rates in our Mortgage centre | Beware Of Soaring Mortgage Fees.
