Just over two in every five (43 per cent) of Britain's homeowners do not compare all mortgages before taking one out, despite saying low interest rates are the most important factor when choosing a deal.
Research by price comparison website moneysupermarket.com1 found 29 per cent of homeowners chose their current mortgage by staying with their existing mortgage provider. Only one in five said they compared several options and providers through a variety of means themselves in order to make their choice. A further 22 per cent used the advice of a mortgage broker.
Only 41 per cent of homeowners said having low fees or no fees was one of their top three reasons for choosing a mortgage, whereas 82 per cent said a low interest rate was key. By just looking at the headline rate without considering the true cost over the term of the deal, borrowers, again, could be wasting thousands of pounds. For example, someone choosing a 4.79 per cent two year fixed rate mortgage from Northern Rock will be £2,080 worse off2 after two years than a borrower on the Co-op Bank's equivalent product at 5.69 per cent, which has a lower arrangement fee.
Louise Cuming, head of mortgages at moneysupermarket.com, said: “Brits should be concerned – with so many people choosing their mortgage without comparing the market it is inevitable that many will not be getting the best deals. And the 82 per cent of borrowers that said a low rate was one of the most important reasons for choosing their mortgage should be aware this is not necessarily the cheapest option.“
The flexibility of a mortgage was one of the top three reasons for choosing a mortgage with 45 per cent of borrowers. This increased to 54 per cent of those aged between 25 and 34 and dropped to 34 per cent of over 55s – suggesting younger borrowers need a mortgage that can adapt to the typical changes in their lives such as marriage, children or even an adult gap year!
The findings are the second in a series from the moneysupermarket.com ‘Mortgage Map’, which uncovers trends and is a comprehensive guide to Britain’s mortgage landscape.
Further findings were:
The likelihood a person will stay with their existing mortgage provider increases with age. Just 19 per cent of those aged 18 to 24 stuck with their existing provider when choosing their current mortgage, compared with 33 per cent of those aged 45 and over.
More than a quarter (26 per cent) of 18 to 24 year olds compared several options from different providers before committing to a deal compared with 17 per cent of people aged 45 to 54.
The number of people that chose their current mortgage via a broker jumped from 14 per cent in the 18 to 24 age range to 31 per cent among those aged 25 to 34.
Customer service is far more important for those aged 18 to 24 with 31 per cent including it in their top three reasons for choosing their mortgage versus just 21 per cent those aged 35 to 44.
Cumingadded: “The figures show the older generation has far more loyalty to providers and are less likely to shop around. I would remind them that loyalty comes at a price and that regardless of age everyone should shop around.
“I was intrigued to learn customer service is important for the younger generation. Providers should take note. Younger buyers – the future of their customer base – are more demanding with much higher expectations than previous generations.”
