Citizens Advice: Customers paying extra £439 a year by not remortgaging

31st July 2017

Loyal customers who don’t remortgage after their fixed-term mortgage deal ends are paying £439 extra a year, on average, according to new research from Citizens Advice.

The penalty affects people who are rolled onto their bank’s standard variable interest rate at the end of a fixed-term mortgage deal rather than opting to remortgage their property.

The charity calculates that 1.2 million people would be better off if they switched to a new deal, with 10% paying more than £1,000 a year extra by staying on the standard variable rate.

First-time buyers, who typically have more debt and more time left on their mortgage, face paying an extra £1,359 a year once their two-year fixed deal expires. The research also reveals that older and poorer mortgage holders are more likely to be hit by a loyalty penalty.

Citizens Advice chief executive, Gillian Guy, said: “More than a million loyal mortgage customers are being stung with higher interest charges when their fixed deals end.

“Buying a home is a major life decision and borrowers taking out their first mortgage often spend a great deal of time working out the best option for them. Our research shows that many who choose fixed-rate mortgage deals face steep price hikes once they expire. But two thirds of borrowers say their lender has never told them they could save money by switching.

“Lenders must be more upfront and provide their customers with clear information about what could happen to the cost of their loan once the fixed-term period ends.”