Many consumers do not change mortgage lender
According to the results shown in a recent report many consumers in the UK are failing to shop around for a better mortgage, even when their existing affordable deals come to an end and they are faced with the prospect of moving to the lender's standard variable rate, which is often in excess of 7.75%.
The poll was carried out by mform.co.uk, and showed that many consumers could be missing out on annual savings of thousands of pounds simply by failing to shop around and find the best mortgage deal.
Since August 2006 interest rates have rocketed, going up five times between August and July 2007 and taking the base rate from 4.5% to 5.75%. Although interest rates have remained on hold for the past four months, the base rate is still far higher than it was previously, and for many this has meant huge hikes in repayments. However, some lenders continue to offer competitive deals for those that take the time to shop around and compare mortgage packages to see what is available from other lenders.
Moreover, many homeowners are due to come out of low rate fixed rate deals over the coming months, and the recent figures indicate that many may fail to shop around for a cheaper deal with another provider, which puts them at risk of seeing their interest rate shoot up from as low as 4.25%, which is the rate it may have been fixed at when the mortgage was taken out two or three years ago, to the lender's SVR of close to 8% or more.
The poll showed that around 40% of consumers have stuck with one mortgage lender, and 25% have failed to switch to a new deal when their existing one comes to an end. An official from mform.co.uk stated: "Loyalty should be rewarded but the millions of mortgage customers who have never moved lender are potentially paying a massive price for not searching the market." He added: "Many may be deterred by the fear they will have to pay high fees to move but the reality is that they can make significant savings."
Tom Smith
15th November 2007
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