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Shopping mad?

Brokers are concerned by research showing that 35 per cent of borrowers on short- or medium-term mortgage rates are not planning to remortgage when their current deal expires.

A survey by Abbey found that borrowers could be wasting up to 20m a month by not seeking a new deal once their rate expires.

Hamptons International Mortgages technical director Jonathan Cornell blames financial apathy and cites a survey which found that people would rather read the back of a cereal packet than their bank statement. He says: “We bury our heads in the sand. We do not like changing or reviewing things and it is criminal. We should be shopping around and comparing rates.”

While Cornell accepts that brokers have a responsibility to prompt clients to remortgage, he criticises lenders for not being particularly loyal or helpful to their clients.

He says: “The client gets to the end of their deal and the lender whacks them onto a standard variable rate. It makes me laugh when you get lenders who pump out these reports because, if they wanted to, they could mailshot their clients at the end of the two-year fix and say these are the rates you could have. But then they would not make so much profit.

“They get sanctimonious but a lot of lenders look at two-year fixes as a way to get customers on their books and then pray they will stay on an SVR because that is where the money is.”

Abbey found that borrowers who do not intend to remortgage could see their repayments increase by as much as 148 a month.

Cornell thinks it should be standard practice for brokers to contact their clients to remind them that their deal is coming to an end. But he can see that some brokers may have let this slip during the boom in the purchase market of the past few years. With purchases slowing down, brokers are starting to look to existing clients who they may have been neglecting, he says.

In a separate survey, Charcolonline found that if borrowers delay remortgaging by three months and go on to an SVR, they could lose 369 each. It is calling for borrowers to review mortgage deals as a matter of urgency.

Charcolonline’s Drew Wotherspoon says: “The amount of money that is wasted is beyond belief. If a borrower continued to languish on an SVR for a year, they would waste 1,500.”

But Chadborn Baker and Kearle IFA Peter Wright finds it hard to believe that bro- kers are to blame for this and thinks the borrowers who are not remortgaging are probably those who did not use a broker to source their original mortgage.

He says: “I am finding at the moment that some- times my clients even beat me to the phone to say: ‘I am coming to the end of my deal. What are we going to do?’ I find it hard to believe that IFA clients make up any great part of the percentage of those who are not remortgaging.”

Wright thinks that lenders need to do more to retain their existing business. “The lenders have buckets with holes in them and all they are doing is throwing new business into the top. They are putting cheap profit in the top because the margins are very small. But, at the bottom, clients are falling out because somebody else is doing a better deal and they move to another lender.”

Abbey’s research also shows that 13 per cent of borrowers do not know their current interest rate – a figure which Wright thinks is probably a lot higher. He thinks people do not monitor their rate and often do not care what it is – which he says may be a good thing because it makes his service look good.

Bradford & Bingley’s research shows that misconceptions about remortgaging continue to deter clients from seeking better deals. Thirty per cent of borrowers who have not considered remortgaging say it is because it is too time-consum- ing and 28 per cent believe it is too expensive. A further 20 per cent said they would not know how to go about remortgaging and 14 per cent thought they could not remortgage unless they moved house.

B&B head of mortgages David Bitner says the reality is that remortgaging is simple, hassle-free and could save clients money.

Plan Insure mortgage specialist Michelle Moran thinks consumers do not realise the potential financial gains involved and are unaware of lenders offering free legal and valuation services.

But she thinks the situation has improved in recent years. “I would imagine years ago the number of customers not remortgaging would be a lot higher because now there is a lot more press and publicity about mortgages and remortgaging. While I think it is still a high number, I believe it will reduce over the years as awareness about mortgages becomes greater.”

Moran believes it is brokers’ responsibility to contact clients to remind them that their rate is coming to an end and says it is in IFAs’ interests to do so.

She adds: “If you do not service your clients yourself, there will always be somebody else there to pick it up.”

Cornell says: “I think it is a terrible shame but, in effect, it makes our lives and our profession slightly easier because when we contact people to say we can save them money, a lot of the time they will say: ‘OK, take this headache away and sort it out for me. I am relying on you.'”


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