A third (33%) of homeowners have been hit with higher mortgage repayments when they move onto their lender’s Standard Variable Rate (SVR)
Homeowners who move onto the SVR spend on average 21 months on this rate and pay on average £2,445 in additional repayments
Three in ten (29%) hit by higher repayments didn’t realise their initial deal had come to an end or left it too late to find a better option****
10% of homeowners who found themselves on the SVR took on debt to cover the higher repayments
38% of mortgage holders rely on their provider to let them know when their initial deal is about to expire
https://www.uswitch.com/banking/>Uswitch.comis calling for lenders to do more to alert homeowners that their introductory period is coming to an end**.**
Homeowners are being caught out by higher mortgage repayments when they move onto their lender’s Standard Variable Rate (SVR), according to new research released by Uswitch.com, the price comparison site and switching service. Those who find themselves on the SVR spend on average 21 months on the default rate, costing on average £2,445 in additional mortgage repayments and driving one in ten into more debt.
The average SVR across the UK mortgage market is 4.49 per cent – 2.83 per cent higher than the average initial discounted variable rate deal. Yet some lenders are failing to do enough to warn homeowners when their introductory rates are coming to an end, leaving them vulnerable to higher mortgage repayments.
Over four in ten (44%) mortgage holders are not sure or have no idea at all when their current deal is running out. And, almost two fifths (38%) rely on their provider to tell them when to remortgage. Yet many lenders are not providing any help, with only 40% of homeowners saying their mortgage provider let them know in advance that their initial deal period was about to expire.
Even when mortgage holders know when their deal ends, the complicated application process is preventing many from taking action. Despite having been through the process before, 60% of all homeowners say finding a new mortgage deal is stressful, over a third (36%) find the process time consuming and nearly a quarter (24%) find securing a new deal confusing.
Tashema Jackson, money expert at Uswitch.com, says: “Lenders rely on borrower apathy when it comes to mortgages – enticing them in with a competitive introductory rate and counting on them to stay put once the deal is over.
“Too many borrowers are in the dark about when their current mortgage deal ends. There is much more lenders can do to help their customers take control of their mortgage. At the very least, borrowers should be able to bank on their lenders notifying them ahead of time when their introductory period ends.
“Homeowners can also make the most of great mortgage deals on the market by planning ahead. If they know when their initial deal is due to expire, they can often avoid higher repayments by shopping around and comparing fixed or discounted rate products.”
FOR MORE INFORMATION
Charlotte Nunes
Phone: 020 7148 4664
Email: charlotte.nunes@uswitch.com
Twitter: @uswitchPR
Notes to editors
All research referred to was conducted online by Censuswide between 17th and 22nd February 2016, among 2,004 UK homeowners with a mortgage.
When asked ‘What was the financial impact each month of being on the SVR?’ 32.8% said they ended up paying higher monthly mortgage repayments
On average, homeowners who automatically move onto their lenders standard variable rate (SVR) due to an initial fixed rate period ending would pay an extra £115 each month. This is based on the following factors calculated in February 2016 using: the average mortgage debt £85,000 (data from the Bank of England December 2015), the average initial discounted rate on a variable mortgage 1.66% (data from the Bank of England January 2016 based on 75% Loan To Value) and the average standard variable rate of 4.49% (data from Halifax February 2016). We found our respondents spent on average 21.26 months on the SVR. 21.26 x 115 = £2,445
When asked ‘Why didn’t you immediately opt for another mortgage deal when your deal expired rather than go onto the standard variable rate (SVR)?’ 29% of respondents selected ‘I didn't realise that my existing deal had expired’ or ‘I left it too late to look for another deal before my current deal expired’.
When asked: “What was the financial impact each month of being on the standard variable rate, 9.7% said they got into debt to cover the higher repayments.
When asked ‘How do you keep track of when your mortgage deal is due to come to an end?’, 37.8% said ‘I rely on my lender alerting me’.
When asked ‘Do you know when your existing mortgage deal comes to an end?’, 15.6% answered ‘No I have no idea when it ends’, 12.7% answered ‘Not sure, but I know the year my deal expires’, 11.5% answered ‘Not sure, but I know the date within a three month period’ and 3.9% answered ‘Not sure, but I know the date within a six month period’. 15.6%+12.7%+11.5%+3.9%=43.7%
When asked ‘Thinking about the last time your mortgage deal expired, did your mortgage provider contact you in advance to let you know your deal would be coming to an end?’, 39.8% answered ‘Yes, with notice’.
When asked ‘How stressful do you find finding a new mortgage deal?’, 44.4% answered ‘Quite stressful’ and 15.3% answered ‘Very stressful’. 44.4%+15.3%=59.7%
When asked ‘When thinking about the process of remortgaging, which of the following describes how you feel?’, 35.7% answered ‘I find the process time consuming’ and 24.2% said ‘I find the process confusing’.
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