In many industries, staying with the same brand can help you save money. From supermarket loyalty cards to haggling with your mobile phone provider at the end of your contract, many companies reward customers who stick around. However, when it comes to mortgages, loyalty could be costing you thousands of pounds each year. This phenomenon is commonly dubbed the ‘mortgage loyalty penalty’ and it often sees homeowners missing out on much more affordable deals with other lenders.
What causes the mortgage loyalty penalty?
Homeowners are often hit with the mortgage loyalty penalty when the fixed rate on their initial mortgage deal comes to an end. Once their fixed rate period expires, many mortgage holders are automatically shifted onto their lender’s Standard Variable Rate (SVR). The SVR tends to be more expensive than the initial deal and these extra costs can equate to tens of thousands of pounds over the course of the whole mortgage.
Why don’t people switch to a better deal?
Despite the financial impact of staying on the SVR, many homeowners fail to switch to a better deal. For some, this failure to remortgage is due to a lack of knowledge, but for others it’s due to the misconception that remortgaging is a lengthy and difficult process.
Some people find themselves in the unfortunate position of being a ‘mortgage prisoner’. This means that since the homeowner bought their property, mortgage providers have tightened their lending criteria in a way that prevents them from applying for a new mortgage.
How can a mortgage broker help?
Often, the remortgaging process can be made easier with the help of a mortgage broker. A good broker will compare hundreds of mortgage deals before narrowing them down to a small handful that best suit the client.
Mortgage brokers can also help those with untraditional finances to remortgage their properties. For example, if a client is self-employed, has an imperfect credit history or a small deposit, a broker will be able to point them in the direction of a lender most likely to give them the money they need.
To learn more about remortgaging your home and avoiding the loyalty penalty, please get in touch with the team at TaylorMade.
