A new online comparison service has been launched to help millions of mortgage prisoners across Britain make savings on their monthly payments.
RateSwitch offers homeowners the chance to regain control of existing mortgage costs by finding competitive loyalty deals from the UK’s leading lenders – completely free of charge.
Coinciding with a new FCA study looking into whether the mortgage sector can be improved to benefit consumers – particularly around the use of digital channels to deliver information or advice – the launch of Rateswitch will also help address concerns around whether tools currently available help consumers make effective decisions.
An estimated 40% of all residential borrowers repay their mortgages on their lender’s standard variable rate (SVR) – the uncompetitive default rate to which most introductory fixed and tracker deals automatically revert to at the end of the term.
RateSwitch uses a three-step process to break down the best loyalty rates available from your current lender in a similar format to comparison sites like Gocompare.
Lee Flavin, CEO at RateSwitch, said: “It’s been a long-held mission of mine to not only raise greater awareness of the unnecessary costs SVRs bring, but to provide homeowners with a tangible solution to the problem.
“For too long, too many have been paying out money that they simply don’t have to. RateSwitch has the power to disrupt this pattern by helping mortgage prisoners who have been stuck on SVR to finally break free.
“RateSwitch solves a sizeable problem by introducing a whole new dynamic. We’re very excited to join the current wave of start-ups striving to simplify complex processes within the mortgage industry, and believe that our existence will go a long way towards helping homeowners save money on their mortgage quickly, with minimal hassle.”
People who have become trapped on their current deal and find themselves unable to remortgage are known as mortgage prisoners.
Since the introduction of the Mortgage Market Review in April 2014 anyone taking out a mortgage is now subject to stricter lending criteria to check that they can afford to repay.
Unfortunately, some borrowers who no longer meet the necessary requirements are unable to get a new mortgage despite their circumstances not changing.
Another reason why people find themselves stuck on an uncompetitive mortgage deal and unable to move is because of negative equity. This is when the value of your property is worth less than the mortgage used to secure it and usually happens when house prices fall.
For example, if you buy a home for £200,000 with a mortgage of £180,000 and your home is now worth £170,000, you would be in negative equity.
Despite soaring house prices across much of the country, negative equity remains a huge problem for many homeowners.
According to online estate agents HouseSimple.com, average property prices in more than half of UK towns and cities are still below those in 2007.
If your house has fallen into negative equity you will find it more difficult to remortgage if you are coming to the end of your deal. If you want to switch lenders it is unlikely your application will be accepted and you will most likely have to move onto a standard variable rate with your current lender, which could mean your payments go up.
If you would like to see how much you could save, click here.
