You might think being loyal is a good thing but think again when it comes to your mortgage. A finance expert is warning Brits might be over-paying by an average of £4,418 simply by staying with their current lender.
Jonathan Bone, Head of Mortgages at online mortgage broker Better.co.uk urged people to keep their eye on the mortgage market and shop around, leaving their sentimental ties to certain lenders behind. He cautioned: “Don’t let convenience cost you.”
The expert admitted it can often feel easier to simply stay with the same lender for the entirety of your mortgage but insisted the “financial benefits can make it worthwhile” to put the time and effort into researching. He shared: “When it’s time to renew, take the time to explore your options to avoid unnecessary expenses, as choosing the right mortgage might be one of the smartest financial decisions you make.”
Describing it as the “hidden cost of loyalty” the mortgage expert noted: “Many banks reserve their most competitive rates to attract new customers rather than reward existing ones.” This can usually be seemingly minor differences, like a 0.1% reduction in interest rate, which people may feel doesn’t justify the hassle of switching lenders but these small changes add up over the full length of a 25 or 30 year long mortgage.
Using data from the comparison site, the expert estimates 89% of homeowners would be better off if they switched lenders, with average savings coming to £116 per month or £4,518 over their fixed term. It’s not just interest rates Jonathan encouraged people to pay attention to but the other potential benefits offered in the highly competitive market, such as cashback, low fees or flexible repayment.
When you’re shopping around for a mortgage, the expert recommended keeping 3 key factors. Starting with interest rates, Jonathan encouraged: “Even a slight difference in rates can make a significant impact over time, so compare annual interest rates, not just monthly payments.”
The second factor to take into account is the fees and charges, particularly arrangement fees, valuation fees and early repayment penalties which are sometimes waived for first-time customers. Finally, the expert urged people to find mortgages with flexibility that can allow them to adjust their loan term or make extra payments without penalties.