Failing to switch at the end of an initial mortgage term and falling onto a lender’s Standard Variable Rate, is costing two million people an average of £4,500 per year in over payments.
Homeowners end up on a Standard Variable Rate (SVR) mortgage are facing a loyalty penalty of £4,500 per year, research from Trussle has found.
The research, which comes a year after the Competition and Markets Authority (CMA) received the loyalty penalty ‘super complaint’, explored loyalty penalties across a number of different household bills. Gas and electricity fared the worst, after mortgages, as failing to switch tariffs costs bill payers £269 on average, per year.
Those with household insurance could be overpaying by £238 per year by not switching deals. Similarly, broadband customers face an average annual premium of £192 for not switching.
The scale of the problem is illustrated by the two million borrowers who are currently sat on an SVR. This means they collectively risk missing out on £9bn worth of savings a year by not switching to the best deal.
Ishaan Malhi (pictured), founder and CEO of Trussle, said: “Consumers are essentially being penalised for staying loyal to their providers and collectively overpaying billions of pounds across the mortgage, utility, product and service sectors.
“Mortgages are clearly the worst offender with the average loyalty penalty standing at £4,500 per year.
“Since the CMA received the super complaint last year we’re yet to see any real progress, despite assurances from the then-government. Similarly, there’s been little movement from the mortgage industry.
“At Trussle, we’re campaigning for a Mortgage Switch Guarantee to make mortgages fairer. We want to ensure that lenders commit to a greater transparency to help borrowers switch easily and eliminate the mortgage loyalty penalty once and for all.”
Previous research from Trussle suggests poor communication is causing many borrowers to lapse onto their lender’s SVR. One in five (21%) said they couldn’t remember the last time their provider contacted them about their mortgage. Almost twice as many (37%) say their lender or broker doesn’t do enough to keep them updated.
