UK property owners warned of high SVR mortgage interest costs
Mortgage borrowers have been warned that if they fail to renew their house purchase loans, they could face paying thousands of pounds more in mortgage interest than they might otherwise do.
According to the a study compiled by online mortgage broker Trussle, those who do not renew their mortgage and instead just slip into a standard variable rate (SVR) mortgage with some of the country's biggest lenders will face paying up to £3,242 more than they would if they chose the right mortgage for their own situation.
It looked at the way mortgage lenders change products for customers when they come to the end of their current agreement, and found that for those who slip into a SVR product, the average monthly payment will climb by 2.5 per cent in the months that follow.
Surprisingly, it was found that as many as 18 per cent of borrowers in the UK property market are now on SVR mortgages because their previous agreement has expired, and could switch immediately to a better deal for them. However, because they haven't yet done so, this group is potentially overpaying by a collective £9.8 billion every year.
It was also discovered that nearly half of all people are not actually sure when they can or should change to a new mortgage product. Of those who were surveyed for the study, some 48 per cent said they did not know when their current fixed rate deal comes to an end.
"The results of this inaugural mortgage saver review highlight the need for the mortgage sector to better educate borrowers and simplify a raft of unfair practices. Borrowers are being put at a huge disadvantage by not understanding the implications of lapsing onto their lender’s SVR," said Trussle chief executive officer Ishaan Malhi.
He also called on the government and all lenders to work together to come up with a workable solution to the problem, which could include an upper limit on SVR rates and a system that tells people when their fixed-rate term is coming to an end.
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08-June-17General Lettings News