Experian reveals homeowners are overpaying up to £1,800 a year on their mortgage

5 Dec, 2018

04 Dec 2018 The majority of mortgage shoppers are looking at fixed-term deals following the rise in interest rates this summer, new analysis from Experian has revealed. At the beginning of August, the Bank of England increased the Base Rate from 0.5% to 0.75% – it’s highest level since March 2009.

The increase in the cost of borrowing looks to have discouraged potential homeowners from considering tracker mortgages as an attractive option for their loan. Instead, borrowers want to future-proof their largest financial commitment.

Data from Experian shows that in September three-quarters (74%) of searches were for fixed-term deals, rising to 83% in October, and 84% in November. In comparison, just 4% looked at tracker mortgages in September – the month after the rate rise – followed by 6% in both October and November.

Meanwhile, further analysis from Experian has found mortgage holders could find themselves overpaying by £1,800 a year if they fail to switch deals when their introductory rate finishes and they slip onto their lenders’ Standard Variable Rate (SVR).

Based on the average mortgage amount taken out by Experian customers in October 2018 of £151,955 with a typical SVR of 4.39% over a 25-year term, the monthly payment equals £822.41.

But with an average introductory rate of 2.38% offered to Experian customers in October, those signing up to this product would have repaid £672.55 a month on the same mortgage amount – a difference of £149.86 monthly and £1,798.32 annually.

A spokesman for Experian said: “Mortgage shoppers have switched their attention to fixed-term mortgage deals to protect themselves from any future rate rises.

“But it’s important for potential homeowners to consider all their options – after all, buying a house is likely to be the largest purchase anyone will make.

“If people are either on a standard variable rate, or approaching the end of their introductory deal, then now is the time find the next mortgage as the potential savings are significant’.

Potential homebuyers can check their mortgage eligibility with Experian, giving them the opportunity to find out which mortgages they are likely to be accepted for and how much they could borrow, based on lenders’ criteria.