Headline rate fixation leaving mortgage borrowers thousands of pounds worse off
Mortgage borrower’s “fixation with mortgage interest rates is leaving them susceptible to thousands of pounds in unexpected costs”, research from Legal & General Mortgage Club has found.
The research shows that most borrowers overlook the impact of factors like early repayment charges (ERC) when seeking a new mortgage.
Legal & General Mortgage Club found that nearly two-thirds (63%) of borrowers consider the interest rate to be the most important factor in deciding their next mortgage.
However, the Club found that some borrowers could face thousands of pounds in extra costs if they wish to move to a new product before their existing fixed term ends.
A borrower that locks into a five-year fixed rate product and then decides to move or remortgage could face £10,891 in ERCs. Yet, only 13% of borrowers see ERCs as being important to consider when getting their next mortgage.
Kevin Roberts, director, Legal & General Mortgage Club, said: “The crisis has taken its toll on the finances of people across the UK and many are now looking for ways to keep their household bills to a minimum.
“A great place to start is with a mortgage as this is normally people’s biggest monthly expense. So, reducing its interest rate down can only be a good thing, right? Well, our latest research shows why it is also important to look beyond the headline rate and consider other factors, like exit charges. Not doing so could mean having to pay thousands in unexpected costs when it comes time to move home or remortgage.
“When looking for a new mortgage, it is typically helpful to work with an independent adviser.
“Whether searching for a low-interest option, or a product that provides more repayment flexibility, it is worth seeking advice. Doing so will mean access to a larger range of mortgage options and these professionals can also recommend specific options based on your individual circumstances.”