6 October 2014
How well do you know your mortgage?
Julie-Ann Haines, Customer Director at Principality Building Society, talks about the importance of knowing your mortgage.
As a result of the recession, many of us have become experts at tightening our purse strings. We scour the reduced section at the supermarket, think twice before buying luxury items, and choose a staycation over holidaying abroad. Despite all this, our recent survey of mortgage holders in England and Wales indicated that almost half of mortgage holders don’t know the current interest rate of their loan.
The survey, which quizzed 1000 people, revealed that while 87% of mortgage customers can state the amount they repay each month, 48% aren’t able to recall their interest rate with absolute certainty. This is somewhat surprising, because 61% of those surveyed said that interest rate was the primary reason they choose a particular mortgage in the first place.
But it’s vital that you understand the finer details of your mortgage plan, because any changes to your product – planned or otherwise – can have an impact on your monthly repayments.
With Bank of England interest rates expected to rise in the not too distant future as well as the inevitable financial impact of Christmas on its way, it’s important to take the time to understand their mortgage and assess whether it’s still relevant to their needs.
Interest rates are a fundamental feature of any mortgage and knowing these figures is an important part of the monthly budgeting exercise.
Thankfully, mortgage customers are more confident when it came to other basic facts about their product, with 95% able to name the provider with which their product is held, 74% knowing how much is owed on their mortgage and 76% aware of the date at which the mortgage will be repaid.
But surprisingly our survey also indicated that more than one in five mortgage customers never change their mortgage. This means that you may not be getting the best deal, as your circumstances changes over the years.
Despite what some may think, a mortgage isn’t always a lifetime commitment that shouldn’t be questioned or changed - you should regularly review it over the years to ensure that you are getting the deal that is in your best interests. The reality is that mortgage rates are constantly in flux, and the mortgage which was right for you when you first took out your loan may not be the best one for you in years to come.
Luckily re-mortgaging can be easy to do and a hugely powerful tool in reducing your monthly payments. Of course, changing financial services providers may be a significant stride out of the comfort zone but our recent feedback from customers’ shows that the process has been more straightforward and hassle free. The reality is that re-mortgaging a property isn’t as daunting as many believe.
The key to responsible mortgage management is to be proactive and not reactive. Take time to familiarise yourself with the key facts of your mortgage and arm yourself with the knowledge to shop around for the most suitable mortgage for your circumstances.
The most important thing to remember is to carefully plan your finances so you can afford your mortgage now and in the future. When you’re making your monthly budget, don’t just assume that your mortgage repayment is going to cost the same as the previous month, particularly if you are on a variable mortgage. Make sure you find out down to the penny exactly how much you are going to repay.
This is as simple as digging out your mortgage approval letter, giving your bank or building society a call or popping into your local branch when you’re out and about. With interest rates still at record lows you may even want to repay more of your mortgage, if you can afford it, now to help manage repayments when rates rise.
The few minutes of effort could give you the peace of mind of knowing you’re on the right mortgage for you and your circumstances.
To view the results of Principality’s ‘Your House’ survey visit www.principality.co.uk/mortgagestoday.