An average borrower with a £100,000 mortgage could save £4,440 over two years of a mortgage, after allowing for fees. For an individual earning £25,000 pa, when this figure is grossed up by 22% to reflect what the borrower would have paid in tax, it equates to a pay rise of £2,407, or 9.6%.
Drew Wotherspoon at John Charcol commented: “Remortgaging has become more and more prevalent in the UK market, but there is still some way to go. No matter how many times some consumers read about the savings they could make, they will still sit on their hands and do nothing. We are hoping that showing what they are wasting in pure monetary terms will finally help the message sink home. If someone told me I was turning down a 10% pay rise I would do something about it.”
Wotherspoon continued: “There is also the misconception that remortgaging is a hassle and takes up too much time and effort. The process is relatively painless for most people and should not take more than 2 hours of a borrower’s time in total. Of course, should you choose to remortgage online, this time, with some organisations, will reduce dramatically. Put another way, you are earning £2,407 an hour for some consultancy work. It really is a no-brainer.”
Example
Someone with a £100,000 mortgage on a standard variable rate will be paying £542 on interest-only per month. If they were to remortgage to a market-leading 2-year fixed rate remortgage deal from John Charcol, at 4.28%, they would pay £357 a month – a saving of £185. This equates to £4,440 over 2 years. After paying the arrangement fee of £495 this figure becomes £3,945. We then gross up this figure by 22% to reflect the tax a borrower would have paid to earn this amount and this produces a figure of £4,813. Finally, dividing by two provides the yearly amount and thus the new annual wage would have to be £27,407.
