A record low base rate in the UK has created a false sense of security for seven million property owners with almost half not reviewing their mortgage regularly, it is claimed.
Overall some 48% of home owners have not reviewed their mortgage since the base rate fell to 0.5% in March 2009 and this rises to 52% of those on a Standard Variable Rate mortgage, research from Unbiased.co.uk shows.
Almost one in five, some 18%, of them said this was because the base rate was so low they felt they didn’t have to worry about their mortgage at the moment.
Yet a mere quarter point rise in interest rates from 0.5% to 0.75% on a typical £150,000 mortgage would add £375 to the annual interest.
The survey showed that of the 48% of homeowners who have not reviewed their mortgage since March 2009, only 19% said they hadn’t because they were already tied into a deal. One in ten homeowners, 9%, said they have never reviewed their mortgage situation at all.
Two fifths of homeowners, 41%, have re-assessed their mortgage situation since the base rate fell to 0.5%. From this, 15% said they hadn’t moved their mortgage, as they could not find a better deal in the market than the one they were already on. Some 7% of those who had reviewed their mortgage were able to move to a better deal in the current low interest rate environment.
Some 4% of those who have reviewed their mortgage stated they failed to take any action on this because they did not understand what effect any change in base rate would have on them.
‘With the base rate remaining at 0.5% for this period, it is easy to see why homeowners have become less vigilant in reviewing their mortgage, with our figures showing that almost half have not looked at their deal at all during the last 22 months and, as result, may be missing out on moving to the best value deals currently available,’ said Karen Barrett, chief executive of Unbiased.
‘The UK’s recent increase in inflation from 3.3% in November to 3.7% in December has sparked increasing forecasts of a rise in the base rate to help reduce the pressure of inflation and predicted to happen earlier than expected. This is now adding unexpected pressure to consumers as the impact of a rise in interest rates is looking more and more likely,’ she explained.
‘Homeowners should seek advice from a whole of market mortgage adviser to ensure they get the best deal available to them. Consumers looking for help with their mortgage or to seek independent financial advice can carry out a free and confidential search with us,’ she added.