Eye-catching mortgage interest rates can mislead – new report from Which? Money

PR Log (Press Release) – Sep 24, 2008 – A survey of Which? members** found that the interest rate was the main reason that one in four (26 per cent) selected their current mortgage (http://www.which.co.uk/mortgages) , but this can be misleading as hefty fees can increase the cost of a deal significantly. Just one in five (20 per cent) chose their mortgage because of the overall cost of the deal.

Seven per cent of those surveyed did not shop around (http://www.which.co.uk/advice/why_switch_mortgages/index.jsp ) at all and simply took out a mortgage with their bank, and almost a third (31 per cent) had never switched their mortgage. A similar number (30 per cent) admitted they were paying their lender’s standard variable rate, although people can normally save by switching to a better deal.

Which? Money also found that although almost eight out of ten of those surveyed were very or fairly satisfied with their mortgage lender, just one in five (20 per cent) were satisfied that their lender keeps them informed about better deals that might be available to them.  

For the second year running, First Direct was rated best in the Which? Money mortgage lender satisfaction survey, with an overall customer satisfaction score of 90%.

Which? Money’s five golden rules for getting a good mortgage (http://www.which.co.uk/mortgages ) deal are:

1. Shop around
Don’t choose a mortgage lender simply because you already bank with it.
2. Check the overall cost of the deal
Don’t get sucked in by a low interest rate, as it could have hefty fees attached.
3. Avoid paying the standard rate
Consider switching to avoid reverting to the standard variable rate when your deal ends.
4. Do your homework
Some of the best deals are not available through advisers, so do your own research as well.
5. Don’t buy insurance from your lender
Most lenders aren’t Which? Money Best Buy home insurers, so shop around to save money.

Martyn Hocking, Editor, Which? Money, says:

“The cost of mortgages has soared in the last couple of years, but a lot of the focus has been on what’s happening with interest rates when in fact it’s the total cost of the deal that’s important. Arrangement fees are now more than £1,000 on average, and sometimes much higher, which means that an eye-catching interest rate can be misleading.
“Whatever you do, don’t take the lazy option of simply taking out a deal with your bank or staying on your lender’s standard variable rate. If you shop around and do your homework, you could cut your mortgage costs by hundreds of pounds.”

- Ends –
Notes to editors
Which? is the leading independent consumer champion in the UK, providing impartial, expert information on thousands of products and services to help make individuals as powerful as the organisations they have to deal with in their daily lives.  To find out more go to www.which.co.uk.  

The full article “Which mortgage lender?” appears in the October 2008 issue of Which? Money magazine. For further information, the full article, a copy of the magazine or an interview, please contact Nicola Frame.

Gift subscriptions to Which? Money magazine can now be purchased from Borders, priced at £24.97 for 12 issues

Research notes

* £1,104 at 1 September 2008 (source: Moneyfacts). For the latest figure and more advice go to: www.which.co.uk/advice/mortgage-fees

** 2,104 members of the Which? Online panel were surveyed in July 2008 about their mortgage and how satisfied they are with their lender.