Millions of UK households are paying over the odds on their mortgage because they are stuck on the wrong deal, new research has revealed.
According to mortgage broker L&C Mortgages, homeowners could save over £2,500 a year on their mortgage by switching to a better deal.
The research found that four million homeowners are still on standard variable rate mortgages which are typically higher.
If interest rates rise, as the Bank of England has hinted, they could potentially see their mortgage payments rise further.
The L&C research also highlighted that a further 1.1 million households are wasting £2.78 billion by sitting on the wrong mortgage deal.
Surprisingly, over half (58%) of those questioned have never re-mortgaged to save money. This is particularly worrying given the news that inflation is at its highest point in four years, energy prices are on the up and there is the potential for interest rates to rise as well.
In addition, L&C discovered that 3.4 million households don’t know the current interest rate of their mortgage, highlighting just how many people could be paying over the odds.
David Hollingworth from L&C Mortgages said: ‘’It’s worrying to see so many people still on a standard variable rate mortgage as they are not the cheapest rates available. Not only is there a lack of awareness around how much could be saved but worse still a huge number of people have never even tried to remortgage to get a better deal.
“With the cost of living on the rise and day to day expenses like energy prices soaring, it is hugely concerning to see that people are paying so much more than they should be. On top of this, our research shows that while homeowners believe they are paying too much for their mortgage they still aren’t taking action to cut their monthly payments.
“Not only have we found over a third of homeowners are on their bank or building society’s standard variable rate, but 3.4million people don’t know their mortgage rate – the chances are they could potentially save hundreds or even thousands of pounds a year by re-mortgaging to a new deal.”
Unsurprisingly, London tops the table of UK regions who are overpaying the most, with an average monthly overspend of £266. The south of England and the Midlands collectively overspend by an average of £222, while homeowners in the North are paying £201 more than they should be.
| Region | Average monthly saving | Average annual saving |
| Midlands | £222 | £2,659 |
| North of England | £201 | £2,406 |
| South of England | £222 | £2,669 |
| London | £266 | £3,193 |
| Grand Total | £216 | £2,590 |
Source: Opinium research and L&C Mortgage’s analysis of data December 2016
L&C’s research shows that the average pre-tax income for households with a mortgage is £45,141 and households are paying an average of £597 per month. However, 38% of mortgage holders can’t imagine a time not having to pay their mortgage.
“A mortgage is likely to be someone’s biggest monthly outgoing, and in only a few easy steps they could get a better deal. It’s crucial that homeowners regularly review their mortgage, to see how their rate stacks up against the record low rates that alternative deals currently offer,” said Hollingworth.
