Study reveals that buyers pay more by not switching mortgage deals

April 10, 2016 by Brendan O'Neill

Home owners

According to a new study, around one third of borrowers fail to swap to a new deal when their existing mortgage deal comes to an end.

The study, conducted by uSwitch.com, a comparison website, revealed that not switching to a new deal costs borrowers nearly £2,500 extra as they are moved to the standard variable rate (SVR). Although standard variable rates vary enormously, they average around 4.49%, which is 2.83% more than an average discounted deal.

A homeowner who doesn’t switch to a new deal will generally remain on the SVR for 21 months, which could add up to £2,445 extra. Despite the Bank of England base rate remaining at its lowest level, several of the SVRs charged by lenders rose last year.

The average SVR is 4.49%, but some of the main building societies charge up to 6%. A money expert at uSwitch.com, Tashema Jackson, says that the lenders rely on borrowers being encouraged by the low introductory deals, but moving to the lender’s SVR once the deal has ended.

Almost 10% of participants in the survey admit that paying the higher payments through not changing to another discounted deal had left them in debt. Another 29% had failed to realise that their current deal had ended. The study revealed that 38% expected to be notified by the lender once the deal had come to an end.

It is crucial to recognise the date when a deal will come to an end and seeking advice from a CeMAP qualified mortgage adviser to find a new discounted deal.