According to new research, more than one in four homeowners may be paying their mortgage provider’s highest rate by not taking advantage of the latest deals by remortgaging.
The new study by online mortgage broker, Habito, found that 27 per cent of people were on a standard variable rate (SVR), many of whom may have defaulted to a higher rate at the end of an initial arranged mortgage deal.
Those on an SVR from one of the UK’s six biggest lenders could face additional mortgage costs of around £4,080 each year compared to the same lenders’ cheapest deals, according to Habito.
The research also found that almost one in five people surveyed did not know whether they were on their lender’s SVR or not and that there was generally a lack of knowledge about remortgaging.
In fact, according to the survey results, one in 10 people believed that, because their monthly payments were higher, the SVR would allow them to pay off their mortgage quicker.
Of course, this is not the case as the additional costs are paid as interest, rather than paying off the mortgage balance.
Separate data from the Bank of England shows that remortgaging dropped 33 per cent between February and November 2020. Habito’s study suggests that is primarily due to misconceptions about remortgaging.
It found that:
- One in six respondents said remortgaging involved taking on more debt, or was something that people did ‘out of financial necessity’
- Six per cent did not know what remortgaging was at all
- Eight per cent thought it meant taking out a second mortgage on the same home, also known as a second charge mortgage.