Mortgage customers pay over three times what they need to!

Posted on: 19 July 2011 by Rhian Mainwaring

Remortgaging through an independent broker could save you a packet

Mortgage payments

Despite all of us needing to economize, the colossal loss on mortgages is bewildering. Yet more and more of us allow banks and building societies to blatantly rip us off, despite the relatively simple task of remortgaging away from our existing lender by using an Independent mortgage broker.

Depending on who you talk to and believe, the average mortgage debt at the moment is close to £140,000.

Much has been talked about how we are at record interest rates for the last two years, yet how much is really being passed onto the public?

If the Bank of England base rate today is 0.5%, we should expect that as a base to lend from. On close study we found some customers to be paying as much as £9450 per year more than that base rate where they were on the lender’s standard variable rate.(1) 

Put another way, over the period of the 25-year £140,000 mortgage, they would have paid £236,250 more in interest over the base rate than someone simply tracking that base rate.

In simple terms there are two types of mortgage rates: a rate that fluctuates and one which does not. 

The advantage of a rate that fluctuates is that you can benefit if the interest goes down and the horrible reverse of that is also true. So, in 1989 if you were subjected to rates of near 15% as many were, times like today should be a party. 

The standard variable rate is a rate which simply moves with the Bank of England base rate and is not fixed. A tracker rate has the same advantage. A fixed rate, however, is a gamble, in that if rates fall you may be paying too much and vice versa, but you at least know you can budget. 

However, having taken the other gamble to pay the standard variable rate, you would therefore not expect to be paying much in excess of the base rate.

What a lovely world we live in where everyone around us has their cake, eats it and having made a complete mess of their banking system, eats our cake too.

And who are the big culprits charging customers? The following are what customers are being charged over and above the base rate for a £140,000 mortgage over the next year assuming the base rate and their standard variable rate stayed the same:

Nationwide Building Society - £2800

Bank of Ireland Mortgages - £3486

Halifax - £4200

Abbey - £5236

Northern Rock - £6006

Alliance and Leicester - £6286

Yorkshire Building Society - £6286

Egg - £6706

Leeds - £7266

GMAC - £7350 (1)

Believe me I have been gentle on many of these lenders who charge a very different rate to new customers than existing borrowers.

The best standard variable rates, or follow on rates that exist at the moment are with Direct line at 2% where you are paying £2100 over the base per year, Derbyshire at 2.5%, Cheltenham and Gloucester, Lloyds TSB Scotland, Intelligent Finance and Nationwide Building Society, all at 2.5%.

Indeed the savings could be even greater still as most bank customers are bundled into packaged mortgages from lenders keen to make the extra sale. As irritating as the holiday rep trying to sell excursions, or the computer salesperson selling protection insurance, banks have seen that selling financial products has been highly lucrative. 

And that’s where customers can lose out again.  In a recent example, I looked at the cost of providing life insurance through one institution versus receiving advice from an independent financial adviser. The lender was tied to Friends Provident who offered £28,876 less life insurance (2) for the customer’s premium than that offered by the Independent Financial Advisor.

It pays to make a call to an Independent mortgage broker and ask for a quick view before any fees are charged to see if you can move to a more competitive rate than your current lender.

For a free check on your existing mortgage call Ronan on 0845 230 9876, e-mail  or take a look at our website .

Your home may be repossessed if you do not keep up repayments on your mortgage.


(1) Woolwich

(2) Exweb

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