Beat the mortgage trap: How to avoid getting ripped off by lenders and cut your home loan bill by £1,000s
A mortgage is many people’s single biggest monthly bill – and that makes it a prime opportunity for saving money.
Millions of homeowners spend hundreds or perhaps thousands of pounds on their mortgage each month, but a sizeable number of them will pay more than they need to.
There are two reasons for this. The first is borrowers failing to shop around for the best rate when they move home, while the second is not moving when short-term mortgage deals end.
Mortgage savings: If you don’t switch at the end of your initial deal you could be paying £1,000 extra on a standard variable rate deal
Britain’s mortgage market is dominated by fixed rates and our favourite deal remains the short-term two-year fix.
Once initial mortgage deal periods end, people are generally free to leave.
But if they don’t arrange a new mortgage in time (which many don’t) they will move to a more expensive default standard variable rate.
And that’s why banks and building societies like short-term fixed rates too. Enough people don’t move mortgages when they end for them to be a nice little earner
The gap between the best mortgage rates and the average SVR has ballooned to 2.7 per cent, according to a recent FCA report.
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For someone with a £150,000 mortgage on a £200,000 home, the cheapest two-year fix could mean monthly payments of £592, while the cheapest five-year fix would carry a £629 bill.
The same mortgage on an average SVR of 4.75 per cent would cost of £855.
That means even fixing for five years could save £2,712 a year.
So, don’t fall into this mortgage trap. If you do one thing with your finances this week, check up on your mortgage.
See if you could save money now, or mark the date when you need to remortgage. And if you are a first-time buyer or thinking about moving, check the best deals you could apply for.
>For our pick of the top not to miss deals this week, read our accompanying Save Money, Make Money round up
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