Millions of households are paying more than necessary for their mortgage, with the average homeowner wasting £2,590 per year.
Research published by mortgage brokers London & Country (L&C) shows that more than four million people are currently sat on their lender’s standard variable rate (SVR) – which is usually more expensive than other rates on the market. Homeowners often end up on the SVR after their initial fixed mortgage period ends.
A further 1.1 million people have locked into a mortgage but are paying more than they need to, the research adds.
Each household is losing £2,590 for every year they spend on these poor value deals, according to L&C. Londoners suffer the biggest loss by sitting on a poor deal as they could save as much as £3,193 per year by remortgaging.
The typical pre-tax income for households with a mortgage is £45,141 and those homeowners pay an average of £597 per month, the report adds.
The research also suggests consumers do not have sufficient understanding of interest rates. L&C says as many as 3.4 million households don’t know the current mortgage interest rate at all.
However switching is not always as easy as it should be. Moneywise reported earlier this month on the difficulties some borrowers – particularly the self-employed and those borrowing into retirement – face when trying to find a new mortgage deal – although there are a few ways around it, which we detail in the article.
David Hollingworth from L&C Mortgages says: ‘’It’s worrying to see so many people still on a standard variable rate mortgage as they are not the cheapest rates available. Not only is there a lack of awareness around how much could be saved but worse still a huge number of people have never even tried to remortgage to get a better deal.”