- Almost a third of UK borrowers still paying 2% too much for their mortgage
“Over the last four or five years we have witnessed countless stories on how the UK population is getting further and further into debt. With the fairly surprising confession of Rosie Millard that she is barely surviving, using all income to meet interest payments on her debt, this awareness has been increased. Yet what is really surprising, is that many families can do something about their situation, using their largest financial commitment to help them out of unsecured debt trouble.
“There are still at least 30% of UK mortgage borrowers who pay a lender’s standard variable rate (SVR), often paying as much as 2% more than some of the better deals in the market. Many of those in the financial mire are likely to have large mortgages, so the difference between paying a good rate and paying a poor one is often hundreds of pounds a month.”
Example
A borrower who has a £200,000 mortgage and pays a lender’s SVR, typically 6.8%, will currently pay £1,133 a month in interest payments. If that same loan is remortgaged to a market-leading deal with a rate of 4.85%, the monthly interest payments shrink to £808. That is a saving of £325 a month, or £3,900 a year*.
Alternatively, and this is something that may appeal to many who are trapped with lots of unsecured debt, a borrower could remortgage to consolidate this debt onto the mortgage, thereby drastically reducing their monthly outgoings. Using the same example, if a borrower has a £200,000 mortgage on an SVR and £40,000 worth of unsecured debt, they could remortgage, consolidate the £40,000 and pay £970 a month in interest. This is still over £150 a month less than they were paying. Of course, a borrower is likely to pay more in interest in the long-term, but as a way to manage cash-flow if you have got large amounts of debt to service, it is a really viable option.
Nathan continues, “It is clear that there are many options open to those who have got themselves into the debt trap. The message is simple – go and get some advice from an independent professional, as there are things that can be done. Ignoring debt and letting it increase is the worst thing you can do as it really is a vicious circle. You pay the interest with all your income and then increase the debt each month to pay for living. Breaking the cycle is paramount.”
Borrowers keen to see how much they could save on their current mortgage repayments should either contact Charcol on 0800 71 81 91 or post a copy of their existing mortgage offer marked clearly “Remortgage Check” to Charcol, 10-12 Great Queen St, London, WC2B 5DD. This service is obligation free and consumers are in no way required to act upon the recommendations given.
