A national survey conducted by Which? has found that over one-third of mortgage borrowers are unaware of their current mortgage rate, a further 44% could only estimate their rate, and staggeringly one in four respondents are sitting on their lender’s standard variable mortgage rate.
For the 77% of borrowers that do not know their mortgage rate and are currently on fixed, tracker or discounted rates, their lack of awareness is probably not adversely affecting them right now. However, for the 25% of respondents sitting on their lender’s standard variable rate, it’s probably a different story.
Which? mortgage advisers calculated that borrowers with an SVR on an average priced home are likely paying as much as £347 per month more, and for borrowers in London this could be as much as £727 per month or £8,700 per year.
Mortgage rate apathy
22% of respondents on their lenders SVR, who have been on the same mortgage for at least five years, claimed that they had never thought about switching and 15% didn’t think it was worth the hassle.
Even though switching mortgages can make significant savings, the survey indicates a high level of borrower apathy. A startling 41% of those on an SVR said they would be unlikely to switch even if they came across a cheaper deal today.
While some borrowers choose to stay on an SVR for the short term due to its flexibility, e.g. they are planning on moving property or remortgaging in the near future, the standard variable rate is usually notably higher than other mortgage deals available from lenders and is rarely considered a good long-term option.
Borrowers encouraged to check their interest rates
Principal mortgage adviser at Which? David Blake urges all borrowers to check their mortgages’ interest rate to find out whether they are paying more than they need to. The remortgage market is very competitive at present, and there are considerable savings to be made by switching to a lower rate fixed term deal.
Younger borrowers are the most clued up
While the survey has thrown up some rather alarming statistics, it did reveal that younger borrowers are the most mortgage savvy. Given the difficulties faced by first-time buyers entering the housing market, getting the best mortgage rate is likely to feature highly in their financial planning.
A reassuring 74% of borrowers aged 18-24 could confidently state their mortgage rate, indicating perhaps that their need to make savings wherever they can is a top priority.