Research from Habito has found that an average homeowner can save £294 a month by remortgaging to another lender, rather than sticking with the standard variable rate (SVR) or reversion rate of one of the bigger high street lenders.
This could lead to a saving of £3,258 per year, which the broker says could help borrowers with the proposed 1.25 per cent hike in NI.
The increase in NI, which is going to be used to finance NHS social care, would mean someone earning the average UK salary of £31,461 would pay an extra £274 in taxes.
The broker added that in a study of 2,000 homeowners, 27 per cent were on the lender’s highest SVR, whilst 18 per cent were not sure if they were, meaning many could secure a lower rate.
Rosie Fish, team lead at Habito, said: “Remortgaging is often made unnecessarily confusing and should be viewed more like switching utility or broadband provider, but with a bigger potential return.
“If you’re not sure what mortgage rate you’re on or would like to know your options, speak to a free mortgage adviser. A mortgage switch could balance out those unexpected new tax bills, with extra savings to spare.”
‘Lethargy or lack of understanding’ can dissuade borrowers from switching
Brokers said that many borrowers could save significantly if they remortgaged, but a lack of awareness and increased ease of product switch could dissuade some people.
Chapelgate Finance’s associate director Colin Payne said: “I can only put it down to lethargy or lack of understanding as it would be incredibly rare for the SVR to be the most appropriate rate for a borrower.”
He added that some borrowers may feel due to a change of circumstance they could not remortgage or take advantage of another rate, and others may not know a better rate would be available. He said many could benefit from switching products even if it was with an existing lender.
Payne said: “In terms of process, remortgaging nowadays is as easy as it has ever been, offers are generally issued quickly and the legal process is becoming more streamlined but importantly if a remortgage isn’t possible a rate switch with the existing lender should be the default position.”
However, he added some clients who were in the last year or coming up to the last year of their mortgage term could benefit from switching if the early repayment charges were one per cent or 1.5 per cent, especially with the availability of sub-one per cent five-year fixed rate deals.
He also said Nationwide had allowed a borrower to secure a new rate, but delay submitting their application as long as an offer is received within 90 days.
This could allow borrower to secure an ultra-low rate but complete later.
L&C Mortgages associate director for communications David Hollingworth said: “Given the current historic low in mortgage rates it seems like a no brainer for borrowers to be considering their options.
“However, it’s also easy to use lose track and many borrowers may be worried that they won’t be able to qualify for a new deal, perhaps because they have been affected by the pandemic. Those that have been furloughed or the self-employed that took a hit in the last 12-18 months for example may mistakenly assume that lenders will not be offering their standard deals. That’s where it remains important for advisers to stress their ability to find the right deal and lender to meet the borrowers’ needs.”
He added that those currently with a deal may struggle to make it worthwhile switching, but it would be in the best interest to “start the ball rolling early” as lenders would be able to make offers that are valid for up to six months.
John Phillips, national operations director at Just Mortgages, said it was “disappointing but unsurprising” that borrowers were unaware of cheaper rates that were available.
“There is a level of apathy from some borrowers who believe that remortgaging isn’t worth the hassle, and in these cases its crucial they seek advice from a broker. A good broker will make the process as quick and painless as possible, and potentially save the client thousands of pounds,” he added.
He also said a change in circumstances could make remortgage seem more difficult, even for brokers.
Phillips added: “From the broker’s perspective, remortgaging can be a challenge as it requires a lot of forward planning and organisation. Our client servicing team proactively contacts all clients whose mortgage is due to end within six months.
“At the point at which the client is ready to remortgage, they are then passed on to their original broker, where possible, and they can then provide them with the expert advice they need to get the best deal possible.”