A staggering three-quarters of mortgage holders have never remortgaged despite record levels of remortgaging last year. And only 4% who have remortgaged have done so more than once.
In a survey commissioned by independent mortgage advisers Charcol, 1,960 borrowers were asked about mortgage debt. The research, conducted by Market Minder in December 2002, found that as many as 8 million homeowners could miss out on potential savings of £8.4bn.
The findings come in spite of increasingly cut-throat competition in the mortgage market which has driven down the cost of monthly repayments and improved the terms on offer from many of the largest lenders. Based on the UK average home loan size, these borrowers could potentially waste £8.4 billion by never remortgaging.
Ray Boulger, senior techinical manager at Charcol, says: “Recent figures highlighted record remortgage activity but equated it with extra spending rather than saving. Our research suggests the most popular motivation to remortgage is still to save money rather than increase debt. For example, by simply remortgaging onto a current market leading two-year tracker rate a borrower with a £100,000 interest-only loan over 25 years, paying a standard variable rate of 5.75%, could potentially save up to £3,520 in the first two years – it's a win-win situation.
“It's surprising there are still so many borrowers who haven't clocked the savings potential of remortgaging, particularly in today's challenging climate with deposit savings rates and stockmarkets so subdued. Low mortgage rates is one of the good news financial stories and borrowers need to maximise the benefit where they can.”
Charcol's research found that twice as many borrowers would remortgage to save rather than spend. 50% of those asked would remortgage in order to reduce their monthly payments, while only 24% would remortgage to increase their debt in order to pay for home improvements or consolidation of other debts.