A recent UK financial services specialist report reveals that huge numbers of UK mortgage borrowers are unaware of the size of their debt and that 60% have no idea what the remaining balance is on their mortgage.
Furthermore, only a third of borrowers consider re-mortgaging when their fixed period deals end according to the study conducted by Momentum UK.
The research suggests that despite the considerable importance financially for most people, many are confused by the current low interest market, with only 25% knowing how to make best use of money in a low interest market place, and whether it is better to overpay on their mortgage or top up their pension.
Many also feel re-mortgaging is onerous and difficult. The advantages, however, can be significant. Although rates will fluctuate over the term of a mortgage, negotiating just a 1% reduction can have very significant benefits on payments. For instance, someone with a Â£250,000 mortgage over a 20 year term at 4% negotiates a new rate of 3%. Over the term of their remaining mortgage, they would save Â£30,000, equal to over Â£1,500 a year.
The study shows that over a third of UK mortgage borrowers are on a standard variable rate, currently 4.9%. As a result, billions of pounds are being overpaid every year by these 33% of homeowners.
The Director of Consumer Strategy at Momentum UK, Dominic Baliszewki, said, â€œMastering the basic elements of a mortgage can save households thousands of pounds of year. Yet millions of borrowers are missing out on huge savings by failing to address the issue, perhaps because they associate mortgages with stress.â€
He added, â€œManaging the loan, especially knowing when youâ€™re coming to the end of a fixed rate period, should be part and parcel of everyday financial management, and if your payments have gone up, itâ€™s time to take action,â€
Whilst it may seem a scary process, itâ€™s clear that in the long run there are great financial gains to negotiating a better rate as soon as a fixed term deal comes to an end that huge numbers of people are missing out on.