Focus on headline rate could leave mortgage borrowers thousands worse off

A fixation with mortgage interest rates among UK borrowers is leaving them susceptible to thousands of pounds in unexpected costs, according to research from Legal & General Mortgage Club.

A survey of more than 1,000 consumers with a mortgage found that most borrowers overlook the impact of factors such as early repayment charges (ERC) when they seek a new mortgage.

Legal & General Mortgage Club’s study revealed that 63% of UK borrowers consider the interest rate to be the most important factor in deciding their next mortgage. However, analysis from the club found that some borrowers could face thousands of pounds in extra costs if they wish to move to a new product before their existing fixed term ends.

A borrower that locks into a five-year fixed rate product before deciding to move or remortgage could face up to £10,891 in ERCs, yet the research found that only 13% of borrowers view ERCs as being important to consider when getting their next mortgage.

“The crisis has taken its toll on the finances of people across the UK and many are now looking for ways to keep their household bills to a minimum,” Legal & General Mortgage Club director, Kevin Roberts, commented.

“Our latest research shows why it is also important to look beyond the headline rate and consider other factors, like exit charges. Not doing so could mean having to pay thousands in unexpected costs when it comes time to move home or remortgage.

“When looking for a new mortgage, it is typically helpful to work with an independent adviser. Whether searching for a low interest option, or a product which provides more repayment flexibility, it is worth seeking advice.”

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