Thousands of homeowners overpaying mortgage by £4,000 a year – here’s how to cut bills
One in three homeowners don't know what mortgage deal they're on which could be costing them thousands every year
THOUSANDS of homeowners are overpaying on their mortgage by more than £4,000 a year because they don't know what deal they're on.
Consumer group Which? found that a third of homeowners are unaware how much interest they pay on their mortgage repayments.
Out of the 3,500 homeowners surveyed, a quarter of them were on their lender's standard variable rate, which tend to cost more than other products available from the same provider.
This is compared to 55 per cent who were on fixed rates, 10 per cent on trackers, and 5 per cent on discount rates.
According to Which?, borrowers with an average-priced home could end up paying up to £4,164 a year - or £347 a month - more on their lender’s SVR than if they were on the lowest fixed-term rate.
This figure jumps to £8,724 a year, or £727 a month, for homeowners in London.
How to switch your mortgage
Here's what the Money Advice Service says you should watch out for when you're thinking about switching your mortgage:
- When to switch your mortgage. You should check if you can save by switching your mortgage when your current deal is about to come to an end, if your lender changes your interest rate, or once a year if you're not tied into a deal with early repayment penalties.
- How to find the best deal. You can use comparison websites to search for the best mortgage deal or, if you need a bit more help deciding what's best, use a broker. If you use a broker, check what fees it charges and if it can look for deals across the entire mortgage market.
- Check for remortgage costs. There might be high early repayment charges to pay if you are leaving before the initial fixed period ends, and there may also be an exit fee if you leave your existing lender. When it comes to the new lender, you might be charged valuation and legal fees as well as a booking or arrangement. So check that it's worth switching once the fees have been taken into account.
But when those who were on the same SVR for the past five years were asked why they hadn’t switched, one in five (22 per cent) said it wasn’t worth the hassle and one in seven (15 per cent) claimed that they hadn’t thought about it.
David Blake, Principal Mortgage Adviser, Which? Mortgage Advisers, said: "I would urge anyone with a mortgage to check what interest rate you’re on and whether you’re paying more than you need to.
"The remortgage market is highly competitive at the moment, so there’s a good chance that remortgaging will save you money.
"Speaking to an independent mortgage adviser is a great place to start to find out your options."
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