Much has been made of the variety of mortgage deals on the market at the moment. Low interest rates have meant many super-low and very affordable deals have been on the market for some time now.
However, a new study suggests that many people are missing out when these deals come to an end. Around a third of borrowers do not take the time to change deals when their original cheap deal comes to an end.
That’s the reality revealed by a study undertaken by uSwitch.com, a comparison website. Once a deal comes to an end, the mortgage holder is automatically switched to a standard variable rate – otherwise referred to as an SVR. This means the rate will typically be much higher than the mortgage holder has been used to – and it can vary at any time, too.
People are losing out on significant sums of money
According to the information revealed in the study, people are paying a lot more than they need to be, simply because they are not switching mortgages when the time comes to do so. The average discounted deal at the moment is around 1.66%, according to the study. This contrasts sharply with the average standard variable rate, which comes in at about 4.49%.
While these are averages, they reveal that the difference between the two is nearly 3% (2.83% on average). This means there are plenty of mortgage holders who suddenly find themselves paying a lot more each month than they really need to be. It also highlights how important it is to be aware of when the fixed rate deal comes to an end. This will allow people to identify the best deals on the market, so they can switch in good time.
Is apathy to blame?
In many cases, people are simply not aware of when their deals come to an end. However, in other cases, people are aware but they put off doing anything about it. Banks and building societies are clearly enjoying the fact that mortgage holders generally take their time to do anything about their mortgages. They switch them to the more expensive SVR, and reap the rewards of the higher interest rates, allowing them to take bigger payments each month.
The figures show how important it is for all mortgage holders to be aware of when their fixed deals come to an end. When they do, it is vital to shop around to see which deals are most competitive at present. If a switch is made in good time, it enables the householder to lock themselves into another good deal for several years to come.
We’ve already mentioned the report works on averages. This means there are people out there with very cheap deals that are going onto a very pricey SVR, by comparison. If you have a mortgage deal that is about to come to an end, it might well be time to start looking for a better deal.