Three quarters (77%) of mortgage holders have not been contacted by their lender at the end of their fixed rate deal costing homeowners £1.6 billion a year
2.1 million mortgage holders with a fixed rate deal ending in the next 15 months are most at risk, as the Bank of England alludes to imminent interest rate rise
One in three (32%) consumers on a fixed rate mortgage do not know what their payments might be when their fixed term ends
Uswitch.com calls on lenders to follow the lead of the energy industry and contact customers before their fixed rate deal ends to inform them of what they will pay when they move onto the standard variable rate.
Three quarters (77%) of UK mortgage holders are set to miss out on potential savings of nearly £1.6 billion every year, as lenders fail to communicate with their customers, according to the latest research by Uswitch.com, the price comparison and switching service. With 2.1 million homeowners with a fixed rate mortgage which is due to end in the next 15 months, and a third (32%) not knowing what their payments might be once their deal ends, there is a real risk that many will be caught out by a possible interest rate rise.
Overall, the research shows that three quarters (77%) of lenders are not communicating the potential financial implications associated with homeowners’ fixed rate deal coming to an end. If homeowners roll over onto a standard variable rate (SVR), they could end up with an interest rate as high as 5%. This is 4% higher than the current cheapest fixed rate on the market and the financial implications could be crippling to household budgets.
The vast majority of homeowners appear to be in the grip of mortgage malaise, despite being dissatisfied with their mortgage deal. According to the research, eight in ten of mortgage holders (79%) have not re-mortgaged in the last two years, or even considered it. Of this group, fewer than a fifth (17%) say they are happy with their current arrangement and just 5% feel loyalty to their lender.
Eight out of ten mortgage holders are not making the most of the opportunity to switch to a better mortgage deal and save money, even though there are a number of attractive offers available starting at below 1%. So, while switching may be on the rise, the current drive to fix is being led by a minority of just 15% of homeowners.
Those who have successfully re-mortgaged to a fixed rate deal in the last year show a clear understanding of the market. A third (33%) of this group switched because they wanted to avoid paying more in the event of an interest rate rise. And a further three in ten (29%) said that the switch to a fixed rate has meant they have secured a lower interest rate on their mortgage. Overall, the move has already paid off, as these respondents cited an average saving of £66 a month, or £792 a year.
Tashema Jackson, money expert at Uswitch.com, says: “It is unacceptable that the majority of UK consumers nearing the end of their fixed rate mortgage deal are unaware of the consequences of slipping onto their lender’s Standard Variable Rate, and the additional strain it could put on their finances.
“With the Bank of England hinting at an interest rate rise in the coming months, lenders need to provide clearer information to their customers. This should include explicit detail about the ramifications of moving from a fixed rate mortgage deal to the lender’s Standard Variable Rate, and what that means for their monthly mortgage costs.
“Unlike many other financial service providers, mortgage lenders are not obliged to contact their customers before their deal ends. This needs to change urgently as homeowners have a right to know how dramatically their financial situation could be affected if they don’t move to another fixed rate deal.”
Find out how you could save over £1,000 a year with Uswitch here.
All research referred to was conducted by Opinium, August 2017. 2,005 nationally representative UK adults (aged 18+). According to figures released by online mortgage broker Trussle in June 2017 (see here).
When homeowners with a mortgage were asked ‘Did your current mortgage provider contact you to suggest you switch to a new mortgage deal?’ 77% of respondents selected ‘No’.
When asked ‘Approximately how much money has the re-mortgage saved you in monthly payments?’ the mean figure excluding those who pay more and don't save was £66. £66 multiplied by 12 is £792. Multiply this potential saving by 2.1 million, the number of households whose fixed rate will come to end in the 15 months, produces a figure of £1,663,200,000.
Calculation based on UK Finance data that roughly half of the 4.2 million regulated mortgage borrowers on fixed rates will come to the end of their deal this year or next. This equals 2.1 million households. In recent months, there has been growing speculation about the prospect of the Bank of England’s Monetary Policy Committee voting in favour of an interest rate rise. An example of recent coverage can be seen here and here.
When asked, ‘If you have a fixed rate mortgage deal, are you aware of what your payments might be after the fixed term ends?’ 32% of respondents selected ‘No’.
List of Standard Variable Rates mortgages can be found on money.co.uk.
List of offers available for homeowners looking to remortgage can be found here.
When asked, ‘Have you considered re-mortgaging your property and moving onto a fixed rate deal in the last two years?’ 79% of respondents selected ‘No’.
When asked ‘Why do you think you haven’t considered re-mortgaging your property and moving onto a fixed rate deal in the last 2 years?’ 17% of respondents selected ‘I am happy with my current mortgage deal’. 5% of respondents selected ‘I don’t want to change mortgage lender’.
When asked, ‘Have you considered re-mortgaging your property and moving onto a fixed rate deal in the last two years?’ a net figure of 15% of respondents selected ‘have moved’. This leaves 85% of respondents have not re-mortgaged or considered re-mortgaging.
When asked, ‘Approximately how much money has the re-mortgage saved you in monthly payments?’ the mean figure excluding those who pay more and don't save was £66. £66 multiplied by 12 is £792.
When asked, ‘Have you considered re-mortgaging your property and moving onto a fixed rate deal in the last two years?’ a net figure of 15% of respondents selected ‘have moved’
When asked, ‘What were your reasons for considering re-mortgaging to a fixed rate deal in the last year?’ 33% of respondents selected ‘I wanted to fix into a new mortgage deal before the interest rates go up’.
When asked, ‘What were your reasons for considering re-mortgaging to a fixed rate deal in the last year?’ 29% of respondents selected ‘I could get a lower interest rate on my mortgage’.
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Uswitch is the UK’s top comparison website for home services switching. Launched in September 2000, we help consumers save money on their gas, electricity, broadband, mobile, TV, and financial services products and get more of what matters to them. Last year we saved consumers over £373 million on their energy bills alone.
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