With almost two-thirds of UK borrowers suggesting that the headline rate is the most important factor when choosing a mortgage, is our obsession with this leaving us out of pocket?
Newly released data from Legal & General Mortgage Club shows that focussing on the headline rate might not be in a borrower’s best interest and that our fixation with mortgage interest rates could leave some susceptible to thousands of pounds in unexpected costs.
For example, a borrower with a £250,000 mortgage who locks into a 5-year fixed-rate product and then decides to move or remortgage could face as much as £10,891 in early repayment charges. Yet, only 13% of borrowers see early repayment charges as being important to consider when getting their next mortgage.
Kevin Roberts, Director, Legal & General Mortgage Club, comments: “The crisis has taken its toll on the finances of people across the UK and many are now looking for ways to keep their household bills to a minimum. A great place to start is with a mortgage as this is normally people’s biggest monthly expense. So, reducing its interest rate down can only be a good thing, right? Well, our latest research shows why it is also important to look beyond the headline rate and consider other factors, like exit charges. Not doing so could mean having to pay thousands in unexpected costs when it comes time to move home or remortgage.
“When looking for a new mortgage, it is typically helpful to work with an independent adviser. Whether searching for a low-interest option, or a product that provides more repayment flexibility, it is worth seeking advice. Doing so will mean access to a larger range of mortgage options and these professionals can also recommend specific options based on your individual circumstances.”
Original Article from Financial Reporter 25/05/2021