Apathy: there’s no point.
Pete Thomson is sales and marketing director at The Mortgage Lender
“What’s the point? Why should I bother? Is it really worth it? It’s too much hassle. It doesn’t make any difference.”
Those of you with kids could be excused for thinking this was a teenager instructed to clean their bedroom. It is, however, the view taken by many when it comes to looking for a better deal than the one they’re on.
If we consider almost any financial product, or utility even, very few people actually make active choices to search out a better deal every time one lapses, comparatively speaking. For something like a bank account, where the government seems to think everyone should continually be switching banks yet the saving/benefit is not huge, I can understand the lack of movement.
However, when we look at mortgages, where the savings are more significant, sitting on a poor deal is somewhat less understandable. When you consider a reduction in rate of just 0.5% can easily save around £700 per year on a £250,000 mortgage, you wonder why anyone would sit on their lender’s SVR really.
Around a quarter of mortgage business written is for remortgages, yet only a quarter of 1% of new business written is on impaired credit, says the FCA. Now, please do shout at me if my logic flawed, but that to me looks like very few people with credit issues are remortgaging. In which case they’re sat on an SVR and could do better.
“Ah but the fees outweigh the savings.” I hear you say. Not necessarily.
It may be the case for smaller loans or the lowest SVRs, but there are still savings to be had when you look at those lenders whose rates are nearer 5%.
And it won’t just be those who have credit issues. There will be a significant number of borrowers out there, whose circumstances have changed during the course of their existing deal that exclude them from their lender’s retention rates; having multiple income sources or becoming self-employed are just two scenarios.
The nature of people’s finances has and continues to change, understanding and being flexible to that is something we do. There is a growing group of people stuck paying mortgages on SVR terms who probably don’t realise they have options to reduce their payments. It’s time that changed.