The mortgage mistake costing the average homeowner £3,000

Homeowners could be paying £3,000 in unnecessary mortgage repayments by forgetting to renew their mortgage deals.

New research by the personal finance comparison site finder.com shows that almost a third (31%) of homeowners have let their mortgage slip into a higher rate for at least 1 month after their fixed-rate deal has ended.

The total amount of time during which people had let their mortgage revert to a higher rate was an average of 10 months over the course of their mortgage, according to the survey.

Someone paying off the cost of the UK’s average house, worth £281,913, on a competitive fixed 3-year rate* of 5.5% would pay £1,361 per month during those 3 years.

But if they didn’t remortgage immediately at the end of the initial fixed term, the interest rate would revert to the lender’s standard variable rate, which is typically around 7.5% at the moment. This would cost them £1,661 per month, which is an extra £300. The average person paying 10 months of this would therefore part with an extra £3,000 to pay the extra interest.

While the average time that homeowners in the survey had left their revert rate going was 10 months, over 1 in 10 (11%) had paid a higher revert rate for more than 1 year. Worryingly, 3% said they’d paid a revert rate for over 5 years. This would cost over £30,000 in extra interest.

Liz Edwards, mortgage expert at the personal finance comparison site finder.com said, “It’s easy to let renewals slide for a while and even if you remember to renew your mortgage, if you leave it too late then you may need to wait a month or two for the rate on your new deal  to kick in. For mortgages this can have a huge impact on the amount you pay.

“The extra monthly cost is shocking in itself but as an illustrative point, if someone paid off a 30-year mortgage using the current average revert rate vs the current average 3-year rate, they’d pay an extra £180,000 in needless interest. So, set a calendar reminder and make sure you find a new deal in plenty of time before your fixed-deal expires.”