Borrowers who only focus on mortgage interest rates leave themselves open to almost £11,000 in unexpected costs if they fail to consider other factors, such as exit fees, according to research from Legal & General Mortgage Club.
It says a homeowner who locks into a five-year fixed-rate £250,000 mortgage, but decides to move or remortgage could face £10,891 in early repayment charges.
However, data from the Club shows that nearly two-thirds, or 63%, of UK borrowers consider the interest rate to be the most important factor in deciding their next mortgage.
While only 13% of borrowers see exit fees as important.
Legal & General Mortgage Club director Kevin Roberts says: “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.
“A great place to start is with a mortgage as this is normally people’s biggest monthly expense. So, reducing its interest rate down can only be a good thing, right? Well, 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.
“Doing so will mean access to a larger range of mortgage options and these professionals can also recommend specific options based on your individual circumstances.”
The club’s early repayment charge calculation is based on averages from five leading five-year fixed-rate mortgage products which feature early repayment charges. Exiting the mortgage after a year leaves the borrower facing charges of £10,841, this falls to £2,762 if the homeowner leaves in the final year.
Its data was collated from a survey of more than 1,000 consumers with a mortgage conducted by the Legal & General Mortgage Club.
