A survey by Nationwide Building Society reveals that many people don’t fully understand the benefits of remortgaging. A third think that remortgaging requires the borrower to take on more debt and only one in six people recognise that one of the most important reasons to remortgage is to switch to another provider to get a better deal and save money.
Nationwide’s survey also showed that:
* One in three people think that remortgaging means having to take out a second mortgage or increase the amount of a mortgage
* One in ten respondents couldn’t explain the term ‘remortgage’ at all
* People are more likely to change their electricity supplier than remortgage (21% compared to only 7% in the past 12 months)
* Of those people that have not remortgaged, 40% said that they would consider remortgaging to borrow more money
* Half of respondents who have remortgaged, did so in order to get a better deal
Nationwide is encouraging borrowers to consider the various benefits of remortgaging, and not just see it as a way of taking on more debt. For example, borrowers could switch their mortgage to another lender to take advantage of lower interest rates and reduce their monthly payments* or even reduce the term of their mortgage**.
Borrowers with a standard variable rate mortgage, or SVR, from Nationwide’s competitors could save £1.3 billion*** a year by switching to the Society’s Base Mortgage Rate (BMR).
The survey also showed that those borrowers who have remortgaged had positive opinions of the process. When asked which words respondents associate with the term ‘remortgage’ the survey showed that 50% of people who have never remortgaged said ‘confusing’ or ‘hassle’. However, 89% of those that had remortgaged in the last year thought it was ‘useful’ and 84% thought remortgaging was ‘good value’.
Stuart Bernau, Nationwide executive director believes that remortgaging should be a priority for many homeowners: "Many people mistakenly believe that switching their mortgage to another provider is a complex process. This is simply not true. If they are willing to change gas or electricity suppliers to save a few pounds, they can save potentially hundreds or even thousands of pounds by filling in a simple form."
The Society’s unique ‘Takeaway Remortgage’ service, launched in 2001, is designed to provide borrowers with a guide to the remortgage process and make the experience both quick and simple.
Some lenders, such as abbey and Halifax, do not allow existing borrowers to take advantage of their best rates, preferring to reserve these rates for new customers. Nationwide does not discriminate between new and existing borrowers in this way and all mortgages are available to everyone.
Stuart Bernau said: "Nationwide believes in being fair and transparent and all our mortgages are available to new and existing customers alike. When Nationwide customers come to the end of their current deal we are delighted for them to take any product on the shelf. If you are currently paying a standard variable rate over 5% you should consider switching provider as you could save a lot of money for very little effort."
Examples of the benefits of remortgaging:
(Results based on an £80,000 repayment mortgage)
1. *Switch from a high Standard Variable Rate and reduce monthly payments
For example, remortgage to Nationwide’s BMR (4.89%) from Halifax’s SVR (5.75%) and save:
* £36.26 on monthly payments
* £6,629 over a 15 year term
2. **Remortgage to Nationwide, pay the same per month and reduce the term
For example, remortgage to Nationwide’s BMR (4.89%) from abbey’s SVR (5.75%) and pay the same per month (£664.33):
* Reduce the term of the mortgage from 15 years to 13 years 10 months.
* Total savings over the full term of the mortgage = £2823.97
3. Borrow more and pay the same
For example, remortgage to Nationwide’s BMR (4.89%) from abbey’s SVR (5.75%) and take out a further advance of £4600:
* Monthly payments remain the same over a 15 year term.
***Calculation based upon representative sample of mortgage balances outstanding, multiplied by pricing advantage ratio between Nationwide and a representative peer group.
