Failing to secure a new mortgage deal when the current rate expires is costing borrowers an average of £62 per week. According to research by Countrywide and mortgage adviser Dynamo, borrowers who end up on their lender’s standard variable rate are paying an average of £371 more as a result.
It seems that a third of homeowners coming to the end of fixed or tracker deals are failing to secure a new mortgage deal and end up sitting on lenders more expensive default standard variable rates instead. As a result, some borrowers could be paying interest rates three times higher than what they would be on a fixed rate, for an average of 42 days before they secure a remortgage deal.
Chief executive at Dynamo, Seb McDermott, said: “The research shows that far too many people are not switching mortgage deals in time. This can prove costly – to the tune of nearly £62 a week for the six-week period – which is more than the average family food shop”.
Homeowners don’t have to wait until their current deal ends before securing a new one. Many remortgage offers are valid for three to six months from the date they are issued. This gives borrowers plenty of time to research the market, find the best deal and lock it in. This means moving from one deal straight onto the next, potentially saving hundreds of pounds.
Different lenders will have different policies. Some remortgage offers may only be valid for three months from the date the offer is made, others may start the countdown from the start of the application. It is important to make it clear what the requirements are when making enquiries, and plan to start looking six months before the current deal expires. Obviously, borrowers don’t want to remortgage before the current deal ends as that could cost them even more in early repayment charges, so getting the timing right is essential. Dynamo have launched the Mortgage Alarm Clock to help borrowers do just that, alerting customers three to six months before that their mortgage product is due to end.
Andrew Hagger, director of Moneycomms.com said “Educating customers that they should start shopping around for a replacement mortgage three or four months ahead of expiry doesn’t seem to be working so the introduction of a ‘Mortgage Alarm’ alert system will reduce some of this wasted spend on inflated charges”.