View more on these topics

Borrowers spend billions in unnecessary interest: Private Finance

Private Finance has concluded that a borrower on an average standard variable rate could save over £4,500 a year by switching to a two-year fixed rate deal.

The mortgage broker says, in total, borrowers pay £15.4bn a year in SVR interest, with the typical rate on a 75 per cent LTV loan being 4.39 per cent, equalling an annual interest payment of £7,546 on an average loan of £173,677.

This compares to the average two-year fixed rate at the same LTV level and loan amount being at 1.76 per cent, which equals an annual interest payment of £3,012.

Multiplying these totals by 25 years yields a £71,553 difference in interest payments. This, says, Private Finance, means that 65 per cent of the original loan amount is paid as interest, comparable to the scale of interest on much-maligned ‘payday’ loans.

Private Finance points to FCA data that shows that just over 2 million mortgage borrowers have been on an SVR for six months or longer – a quarter of all mortgage borrowers.

Private Finance director Shaun Church says: “With rates falling fast in recent years, the gulf between SVRs and typical mortgage rates is becoming increasingly apparent. Lenders are cashing in on borrowers’ inertia, charging rates that are more than two times the rate they would charge to new customers.

“Though it is ultimately the borrower’s choice, lenders are making significant profit by punishing customers for being loyal. The message to borrowers is clear: don’t fall into the SVR trap and always switch to a more competitive deal once your existing mortgage term comes to an end.”

Recommended

Gibraltar Offshore
2

Police end investigation into head of international pensions firm

Police have ended their investigation into the chief executive of cross-border pensions provider STM Group. A statement from the Aim listed firm – which hit headlines again recently for acquiring a majority stake in embattled Sipp provider Carey Pensions – says that “no further action” will be taken against boss Alan Kentish. Royal Gibraltar Police […]

AJ Bell sets minimum application value for IPO

AJ Bell has confirmed at least a quarter of the platform’s share capital will be floated when it lists later this year. The platform has set a minimum application value of £1,000 and is now expecting to list on the main market on the London Stock Exchange in December, the company announced this morning. Selling […]

5

Chris Gilchrist: The property dream is over

The British have an obsession with residential property shared by few other Europeans. In many places on the continent, you rent city centre flats until you retire, when you buy or build a home in the country. Europeans devote around 15 per cent of spendable income to housing compared with a typical 30 per cent […]

Technology-Computer-Binary-700x450.jpg
2

Aegon outsources administration services for 1.4m customers

Aegon has announced a 15-year contract with IT company Atos to service and administer 1.4m of its non-platform business customers. The clients hold a variety of different types of protection policies. Aegon will continue the administration and servicing of all platform policies and schemes across Aegon Retirement Choices, Aegon Platform (previously Cofunds and Investor Portfolio Service), TargetPlan […]

Newsletter

News and expert analysis straight to your inbox

Sign up

Comments

    Leave a comment

    Close

    Why register with Money Marketing ?

    Providing trusted insight for professional advisers.  Since 1985 Money Marketing has helped promote and analyse the financial adviser community in the UK and continues to be the trusted industry brand for independent insight and advice.

    News & analysis delivered directly to your inbox
    Register today to receive our range of news alerts including daily and weekly briefings

    Money Marketing Events
    Be the first to hear about our industry leading conferences, awards, roundtables and more.

    Research and insight
    Take part in and see the results of Money Marketing's flagship investigations into industry trends.

    Have your say
    Only registered users can post comments. As the voice of the adviser community, our content generates robust debate. Sign up today and make your voice heard.

    Register now

    Having problems?

    Contact us on +44 (0)20 7292 3712

    Lines are open Monday to Friday 9:00am -5.00pm

    Email: customerservices@moneymarketing.com