Homeowners may regret ignoring record-low interest rates
Last month saw the well-publicised launch of Help to Buy Isas. Inevitably, we have seen both intense competition among lenders, resulting in some attention-grabbing headline rates, and strong interest from first-time buyers.
The Isas are widely regarded as a ‘no-brainer’ for prospective first-timers. After all, who would turn down the chance to earn interest and be eligible for ‘free’ money, especially during a period when we are all looking to save a bit here and there?
It did get me thinking, though: if potential first-time buyers are so savvy about ways to generate additional savings, why aren’t more homeowners?
When it comes to existing owners, there is still too much complacency around how and when to switch deals, despite the remortgage market continuing its momentum after the significant growth seen during the summer.
According to a survey from LMS in November, only half of remortgagors had switched before the end of their current deal – down from 60 per cent in October, despite the competitive rates available. The survey also revealed that 37 per cent of remortgagors had managed to lower their monthly payments by switching to a lower rate, of which 3 per cent had reduced their payment by more than £500.
This illustrates a continued lack of proactivity among homeowners, who are missing out by ignoring some of the record-low rates on offer. Perhaps more of them should take a leaf out of the prospective first-time buyer book, maximising the potential savings on offer from the heady combination of a competitive marketplace, increased government support and robust economic conditions. Such a scenario will not be around forever.
Jackie Uhi is managing director, mortgage distribution, at Barclays