The millions of UK homeowners who currently have a mortgage have been issued a warning, as they could be spending considerably more money than they need to. Sam Wilson, market analyst at consumer champion platform Which?, explains that mortgage applicants tend to prioritise lenders they have existing relationships with – but that sticking with your current bank can often be an expensive mistake.
He adds that it is “more important than ever” to do your research before settling on a lender. It comes as Which? asked thousands of homeowners why they chose their current lender, and the most common reason was that they already had some kind of financial relationship with them, such as a bank account or credit card.
However, Sam explained: “Currently, there are around 5,000 mortgage deals on the market from more than 80 lenders, so it’s highly unlikely that your current bank will offer you the very best deal.” He continued: Even small differences in rates can have a big impact on repayments. We’ve analysed how much difference 0.5 percentage points on your interest rate can make, using data from Moneyfacts.”
Figures used as an example by Which? state that when buying a home for £246,000 – the average price currently paid by first-time buyers according to the Land Registry – and taking out a two-year fixed rate mortgage at 90% loan-to-value, with a 25-year term, a 0.5% difference in rate would be £65 per month.
Over the two years alone, this adds up to £1,560 that could’ve been saved with a better deal. Sam’s Which? article adds: “If you’re borrowing more, or taking out a longer mortgage term, this can total thousands of pounds.”
