Fri, 14 Jul 06
It seems a good many of us take heed of bad experiences our friends or colleagues have had before choosing a mortgage provider or savings account for ourselves.
While only 18% of us have moved mortgage supplier due to bad customer service, according to recent moneyfacts.co.uk user polls some 28% of us have avoided taking out a mortgage with a particular provider due to a friend’s bad experience.
We are much more ready to switch savings or bank accounts however, says Moneyfacts. 52% of us have moved our savings because we were unhappy with customer service, and 42% of us have avoided a particular account provider due to a friend’s bad experience.
With bank account providers, 46% of us have moved current account because of bad customer service and 45% have avoided a certain bank because of a friend’s bad experience.
Switching mortgages is something that many of us avoid doing even when it would be beneficial to do so. It can seem like a lot of hassle but if you look at potential savings it is often worthwhile. We should not leave it until we have a bad experience with a lender before moving our mortgage.
The first thing to check when deciding to change mortgages is whether there are any penalties for leaving your current one. Often when we take out a mortgage deal we will be tied in for at least the initial period.
For instance, with a five year fixed rate mortgage, if we wanted to leave before the initial five years had run we would probably be charged, in some cases thousands of pounds. Other mortgages have extended penalties, so we would still be charged even after the initial period has finished. If you ask your lender they will tell you how much it will cost you.
Once an initial mortgage period ends, you tend to go onto the lender’s standard variable rate. These are typically higher rates than other mortgage offers. At the moment, the average standard variable rate is around 6.3%. Looking at the mortgage best buy charts, rates of less than 5% can be found. On a £150,000 repayment mortgage over 25 years at a rate of 6.3%, monthly repayments would be £994.15. On the same mortgage at a rate of 5%, repayments would be £876.89. This is a difference of £117.26 a month – a huge £1,407.12 over a year.
There are many other things to consider when choosing your mortgage such as term, rate type, deposit, insurances and fees. Read more about these in moneyfacts’ mortgages things to consider guide.
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