A study by price comparison firm Moneysupermarket highlighted a host of misconceptions about remortgaging, with 45 per cent of those surveyed believing that doing so was a negative thing, while one in five were “embarrassed” to admit they had done it.
Almost one in four believed you only remortgage in order to borrow more funds, while eight per cent suggested you had to be in a “desperate” position in order to remortgage.
Another 11 per cent believed there was a limit to how many times a borrower can remortgage.
Brokers agreed that they commonly have to clear up such remortgaging misconceptions, and highlighted ways to get through to borrowers the importance of switching.
More than further borrowing
Daniel Hegarty, chief executive officer at Habito, said its own research had uncovered a host of misconceptions around remortgaging.
Borrowers often associated it with taking on more debt, carrying out renovations or failing to meet existing repayments, rather than the idea of moving to a better rate.
He continued: “Engaging with a remortgage is a hassle for most homeowners. No-one wants to think about their deal on average every 20 months for the next 30 years, and most people don’t have an opinion on what the Bank of England will do with interest rates in the next year.”
However, he emphasised that this “switching inertia” is costing borrowers dearly.
SVRs show borrower confusion
Stuart Powell, managing director of Ocean Mortgages, said the sheer number of borrowers sat on a higher rate than they needed to be demonstrated that remortgaging is “greatly misunderstood”.
He added: “We have noticed this year in particular how few people realise that you can remortgage an equity release lifetime mortgage.
“Many people are on rates between six per cent and nine per cent, and we are helping them move to rates below three per cent fixed for life.”
Getting the message across
Powell emphasised that brokers have a responsibility to help people understand their remortgage options, and noted his own firm had made a series of short videos to explain how and why they should do this.
He added: “Our videos have proved extremely popular with many people, and now feature on the Equity Release Council website. If an adviser produced these for remortgage clients, they could do really well.”
Hegarty suggested the best way to engage borrowers with remortgaging was to give them plenty of advance warning that their fixed deal is coming to an end and demonstrate their potential savings by switching.
He added: “We believe that giving all customers proactive alerts a minimum of four months out, gives them the best time-buffer to register it on their to-do lists, do their own market research, speak to a broker, and get their remortgage applied for and approved before they slip on to their costly SVR.”