As you may not be aware but Banks and Building societies have increased the difference between their fixed-rate mortgage deals and standard variable rate mortgages. This is affecting most long-term mortgage customers around the UK.
Why are they doing this? Well, the answer is simple, to boost their overall profit margins and they are taking advantage of borrowers who haven’t been able to shop around for a better alternative and think of just letting their mortgages roll over to the next “best thing”.
As we continue to see in many industries, new customers get the best rates and the existing customers are left with older often less value for money options. This is strife in mobile phone contracts and so on. It’s now become apparent that this is also the case for banks and mortgages.
The result of this is that the difference between rates on the market and the standard variable rate has increased by up to four times. This tactic is in place to target borrowers who are not shopping around for alternatives, either they don’t know that they can or just don’t have the time. On average the borrower can end up paying up to £6,000 moreover a 2-year period. This is just unacceptable especially in an environment where current interest rates are so low and customers are entitled to benefit from this but bank and building societies don’t want you to take advantage of this.
Many mortgages have an introductory offer in place much like any other contracts available in the market across numerous industries. This is to entice you into becoming their customers. However, it’s the faster service and knowledge available is where customers fall short and out of pocket. Once this intro offer comes to an end, they are rolled over to a variable rate deal where customers are a lot worst off.
Example:
- Average SVR with 25% deposit is around 4.75%.
- £150,000 home loan taken over 25 years means monthly repayments of £855.
However,
- The same borrower to a top 1.49% 2-year fixed-rate deal, this would decrease to a monthly payment of £599.
- That’s a huge saving of £256 per month!
Granted you can switch over at any given point once the introductory offer is over but this still means you will be overpaying for a period of time and possibly of not shopped around, not the best possible option for you.
Its never been so important to know the options that are available for you in the marketplace, this includes bank and of course other lending organisations who just as accredited and offer far better rates for a longer period of time.
The Luxe Financial Team can help you find the right mortgage by evaluating many lenders in the UK and help you to achieve the spare cash you may need for other projects etc.