Large numbers of borrowers are paying over the odds for their mortgage by not remortgaging. Dilpreet Bhagrath, mortgage expert at online mortgage broker Trussle, explains why it’s about time switching was made easier and more transparent.
For most people, securing a mortgage is one of the biggest financial and emotional commitments of their lives. However, with almost half of borrowers (41%) finding the mortgage process stressful, it’s no surprise that so many people shy away from the process when it comes to switching.
There are two million borrowers on their lender’s Standard Variable Rate (SVR), collectively overpaying billions of pounds annually in extra interest charges.
These borrowers could save an average of £4,500 a year by switching to a more suitable deal when the time’s right.
Often mortgage holders are put off going through the process again due to such a bad experience getting their last mortgage, or they’re unaware of the benefits of remortgaging or have forgotten when their current deal is due to end.
Currently, there isn’t a standardised process that lenders follow to let you know when you’re about to slip onto the SVR.
In our survey of 2,000 mortgage borrowers, one in five (21%) said they couldn’t remember the last time their provider contacted them about their mortgage, while almost twice as many (37%) stated that their lender doesn’t do enough to keep them updated.
Being proactive
To proactively find out when your initial period is due to end, we’d advise reviewing a copy of your original mortgage offer or calling up your lender to find out.
All borrowers should review their mortgage at least three months before the end of their initial period.
At this stage, you should seek advice from a broker to find the most suitable mortgage deal for you. Your broker will advise you if it’s best for you to stay with your existing lender or remortgage to a different lender.
Tackling switching inertia
As an industry, we need to tackle switching inertia. With almost half of homeowners finding their last mortgage experience stressful, it’s our responsibility as brokers and lenders to improve the process.
There needs to be less paperwork, no unnecessary fees, and a more transparent journey to encourage people to remortgage when the time is right.
That’s why we’re calling on the Government to introduce the Mortgage Switch Guarantee: a new set of principles to which the industry should adhere to make switching transparent.
Our hope is that this will offer consumers greater protection, awareness and understanding when it comes to their mortgage, preventing them from paying more than they should.
We’ve also introduced a free mortgage monitoring service that will alert borrowers when a better deal comes onto the market. If it calculates that savings could be made by switching, Trussle will automatically alert the borrower so they can relax in knowing that their mortgage is proactively looked after.
