UK mortgage borrowers are generally oblivious to size of their debt with three in five having no idea of the remaining loan balance on their home, new research has found.
Just 40% of mortgage borrowers are satisfied they know what’s left to pay on their loan and only a third think it’s important to consider remortgaging once fixed period ends, according to the study from financial services specialists Momentum UK.
The study reveals that there is confusion in the current low interest environment and only a quarter know whether it’s better to overpay on their mortgage or top up their pension, despite both being considerable financial issues for many people.
While remortgaging may seem an arduous task, the benefits are substantial, figures from the firm suggest. It says that if a borrower with a £250,000 mortgage on a 20 year term renegotiated from a 4% rate to a 3% rate they would save £30,000 over their mortgage term, or more than £1,500 annually.
While rates will vary over this period, the calculation emphasises the difference just 1% less interest can have on payments. It adds that given that the average standard variable rate is currently 4.9% and 33% of UK home owners are on an SVR, households are wasting billions of pounds a year by paying over the odds.
The research also highlighted people’s confusion when it comes to making the best use of their money in a low interest rate environment. Just 24% were satisfied that they know whether it is better to overpay on a mortgage or top up a pension.
‘Mastering the basic elements of a mortgage can save households thousands of pounds of year. Yet millions of borrowers are missing out on huge savings by failing to address the issue, perhaps because they associate mortgages with stress,’ said Dominic Baliszewski, director of consumer strategy for Momentum UK.
‘Managing the loan, especially knowing when you’re coming to the end of a fixed rate period, should be part and parcel of everyday financial management, and if your payments have gone up, it’s time to take action,’ he added.