Barriers to remortgaging: Why borrowers don’t switch
Stricter borrowing rules and the hassle of switching provider have been named by borrowers as the main reasons for not remortgaging last year.
In a study by credit reporting agency, Experian, only 6% of the people questioned had switched their mortgage provider last year and many were paying their lender’s standard variable rate (SVR).
This is the deal your mortgage ‘defaults’ to when you come to the end of your introductory offer – it is usually more expensive. In fact, Experian said, for a typical homeowner, this rate could end up being around £1,800 more expensive annually.
Now it has launched Money Matters Week to try and raise awareness of the savings people could make to their household bills simply by switching provider. As well as looking at energy suppliers and credit cards, Experian is hoping to encourage more people to switch from their lenders’ SVR.
Of those who ended up on their providers’ SVR, it found, 29% did so because they thought remortgaging was too much hassle or too complicated.
Meanwhile 28% said they didn’t realise that moving onto the SVR would involve higher repayments. A fifth had made an attempt to remortgage, but were unable because of stricter borrowing criteria.
Amir Goshtai, managing director of Experian Marketplace and Affinity, said: “While many households are looking to make savings where they can on their monthly bills, too many are still over-overpaying when they don’t need to.
“That’s why we have launched Money Matters Week, to bring some focus and practical tips to help people review their bills and make some savings.
“I urge homeowners to make sure they know when their introductory offer is coming to an end and see what their re-mortgaging options are. Switching energy companies is a simple process and there are many ways to avoid paying interest on credit cards.”
Experian said the combined savings a typical household could make by switching were £2,521.
Article by Kate Saines for www.whatmortgage.co.uk