50% Of Mortgages Holders Are Paying Far Too Much
August 2005
An astounding piece of market research just released shows that over 50% of all UK mortgage holders are paying far too much in monthly repayments. This is because their mortgage rates are based on a Standard Variable Rate (SVR) instead of other cheaper plans like trackers, fixed and discounted.
Folks, the mortgage sector is crying out for your business right now so do some research into what's being offered and you could find your monthly repayments slashed by up to 25%!
Why Are SVR Mortgages A Problem?
It's all to do with interest rates. The average rate charged on an SVR mortgage is 6.5% whereas right now you can easily get a 2-year fixed mortgage at 4.29% which is cut of a third!
- A £150,000 mortgage on an SVR of 6.5% is wasting around £280 a month or £3,300 as year in extra payments
- And with interest rates expected to fall further these deals are only going to get better
However, discounted mortgage deals are all very well until the discount expires (usually within 2-3 years), then monthly repayments can jump dramatically. Of course it's always possible to remortgage and go for another discounted deal (if a good one is available at that time) but watch those costs as many mortgage lenders are adding all sorts of crazy and greedy costs to the mix.
In fact, costs with mortgages should never be ignored as many finance companies offer 'headline grabbing interest rates' only to levy charges which makes the complete deal uncompetitive.
If you want peace of mind with your monthly repayments then fixed mortgages are ideal but perhaps its better to look for a higher interest rate (than a heavily discounted 2-year deal) but for a longer time period so giving more financial predictability.
Where Are The Best Mortgage Deals?
Right now the best deals in the mortgage sector seem to be with fixed rate mortgages, cheaper than both discount and trackers. But if rates fall further as most economists agree then tracker mortgages which follow or 'track' base rate movements will become more attractive by default.
Should Mortgage Advisors Be Used?
Consider these points;
- Mortgage business is now so sophisticated it pales into comparison what was available 10 or 20 years ago
- For this reason it's often good advice to at least visit a mortgage broker and see what they can offer you
- Finding the right financial advisor is paramount - Read this article 'How to find a good Financial Advisor'
- A good mortgage broker can save you a fortune not only in with a better overall deal but possibly reduced fees as well
- Mortgage brokers not only understand their market-place but also have access to most if not all of the special mortgage deals available at that time
Summary
If you're one of the many stuck in a mortgage linked to a SVR then you're likely paying away far too much money. The market-place is teeming with great offer that can save you thousands and changing mortgages has never been easier or simpler. Don't forget to at least consider using a mortgage broker but as always never sign up to the first deal you're offered.
Finally, realise that with personal finance products the more you understand how they work and the related fees and charges the better deal you're going to get.
See Also
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