Millions of UK homeowners are paying thousands of pounds in unnecessary mortgage costs each year without realising it, according to a study of Britain's largest lenders.
Around 2m homeowners are over-paying an average £3,240 in annual mortgage costs – that's an eye-watering £9.8bn collectively, according to analysis by online mortgage broker Trussle.
And with London house prices considerably higher than the UK average, those in the capital are pouring thousands of pounds more down the drain by not switching.
There are around 3m households in the UK currently on a lender's standard variable rate (SVR) – the rate reverted to when an initial rate falls away and people do not remortgage to another deal.
Some 1m of such households are so-called "mortgage prisoners", unable to switch as borrowing rules mean they fail to meet the criteria for a new mortgage.
But the remaining 2m (that's nearly a fifth of the mortgage borrowing population) that could switch immediately are failing to do so.
Research suggests two-thirds of people do not even realise a SVR is typically more expensive that a lender's fixed rate. In fact, Trussle said, a quarter of people don't even know what SVR means.
How much could you save by switching?
|Bank||SVR||Best 2yr fixed rate||Difference||UK annual saving||London annual saving|
|Santander UK Plc||4.50%||1.31%||3.19%||£4,173||£9,392|
|Royal Bank Of Scotland||3.82%||1.32%||2.50%||£3,270||£7,361|
Meanwhile, almost half of UK mortgage holders (48 per cent) don't even know when their teaser rates come to an end. And the process of remortgaging is too much for many: over 40 per cent of people said getting a first mortgage was a negative experience and almost one in 10 were reduced to tears from the process.
Perhaps unsurprisingly, consumer champions were frustrated at the results of the survey.
Chief executive of property advice website HomeOwners Alliance Paula Higgins said: “This study confirms that more needs to be done to educate homeowners on the value of remortgaging at the right time to avoid ending up on a more expensive SVR."
Ishaan Malhi, the chief executive of Trussle, said borrowers are being put at a "huge disadvantage by not understanding the implications of lapsing onto their lender’s standard variable rate".