False sense of security for homeowners
With the base rate remaining at 0.5% for a record 22 months, homeowners have been lulled into a false sense of security and as a result have failed to review their mortgage rates.
Of those on a standard variable rate mortgage over half (52%) have failed to review their mortgage since the base rate hit its all time low of 0.5%. Almost one in five (18%) of them said this was because the base rate was so low they felt they didn’t have to worry about their mortgage at the moment.
A mere quarter point rise in interest rates – from 0.5% to 0.75% – on a typical £150,000 mortgage would add £375 to the annual interest.
The survey showed that of the 48% of homeowners who have not reviewed their mortgage since March 2009, only 19% said they hadn’t because they were already tied into a deal. One in ten homeowners (9%) said they have never reviewed their mortgage situation at all.
Two fifths of homeowners (41%) have reassessed their mortgage situation since the base rate fell to 0.5%. From this, 15% said they hadn’t moved their mortgage as they could not find a better deal in the market than the one they were already on. 7% of those who had reviewed their mortgage were able to move to a better deal in the current low interest rate environment. 4% of those who have reviewed their mortgage stated they failed to take any action on this because they did not understand what effect any change in base rate would have on them.
Karen Barrett, chief executive of unbiased.co.uk comments, “With the base rate remaining at 0.5% for this period, it is easy to see why homeowners have become less vigilant in reviewing their mortgage, with our figures showing that almost half have not looked at their deal at all during the last 22 months and, as result, may be missing out on moving to the best value deals currently available.”