New research by a top lender suggests that borrowers are regularly finding themselves hit by additional costs running into thousands of pounds as they are too focused on rates.
Legal & General Mortgage Club says that its latest study shows a majority of those taking out a mortgage loan are finding themselves in that position because they do not factor in aspects like early repayment costs. Its study reveals that the rate of interest available with a loan is considered the decisive factor by 63% of borrowers – which adds up to almost two-thirds of them.
The study points out that, although it is not wrong to pay attention to interest rate levels, focusing solely on them leaves borrowers vulnerable to additional costs should they want to swap products prior to the end of a fixed-rate mortgage term.
In the case of a fixed rate five-year mortgage, early repayment charges for switching or remortgaging could run as high as £11,000. However, the study shows that this is an issue that just 13% of mortgage borrowers pay attention to when seeking a loan.
Kevin Roberts from Legal & General told Financial Reporter that:
“Our latest research shows why it is also important to look beyond the headline rate and consider other factors, like exit charges.”
Roberts added that failure to do so could prove very costly when remortgaging or moving house.
This study shows again why using an advisor with a CeMAP qualification is so important for borrowers who don’t have in-depth knowledge of how mortgages work.