A lack of financial literacy can have lasting impacts on an individual’s prospects from the moment they start earning, to the day they decide to retire, and well beyond that. There is little one can do once they reach that stage in their later life, too. In the same way that the UK is suffering from historic savings, investment, pension and home-ownership gaps, even those who have successfully negotiated their first home purchases are still running into a complex world of misinformation and very little else. The same can be said for those who are looking to take new steps on the housing ladder – or are simply looking to find better mortgage deals.
Like much of the financial world, where traditional services have failed, tech-driven alternatives are springing up to plug the holes and support customers in smarter ways. Recent research reveals distinct issues in – centrally – the process of remortgaging, and how we are bridging the gap in comprehension.
Remortgaging defines itself as, simply, swapping a current mortgage deal for another, and can be triggered by several different motivations. Getting a better rate, buying another property, paying off outstanding debt, or making home improvements tend to be the major reasons for doing so. You might remortgage with your current lender or opt for a different one altogether. In fact, there have already been signs of shifts in customer behavior. For example, Mortgage Solutions analysis has found Mortgage brokers lose 60 percent of their clients to direct lender channels when they remortgage.
They tracked the outcomes of thousands of fixed-rate mortgages between early 2015 to late 2016, providing a six-month extension at either end of the 24-month initial rate period. A significant drop-off was detected in those remortgaging with brokers, and a sharp uptick was seen of those remortgaging with lenders. This thus indicates that customers are evidently very comfortable in behaving as financial ‘nomads’, willing to work with whoever might offer the best deal.
People love a bargain if they can find it – nothing new here. However, it seems that visibility and understanding were key issues in people overpaying on mortgages, rather than opting to remortgage. The FCA’s Mortgage Market Study found that approximately 800,000 homeowners spent more on their mortgages than they needed to. Furthermore, the argument was made that switching could result in an average annual saving of £1,000.
Further companies also found that nearly 50% of people perceived remortgaging negatively, and around one in five responded that they actually felt embarrassment in telling others they had remortgaged.
The research revealed that 23% of people assumed remortgaging was purely necessary for those looking to borrow money, while 13% believed they could only remortgage if their current deal was ending. Even more concerning, 11% thought there was an arbitrary limit to how many times they could remortgage a property.
Unsurprisingly, intuitive and informative options are springing up that cater to the audience of mortgage-holding customers who are, according to statistics, in need of more clarity about their options regarding remortgaging. Trussle, for example, builds on the comparison site model, that is combatting the often perilous minefield of remortgaging in the UK housing market, providing a safe-space to get to grips with the process, and if and how it could work for you.
Services like this are increasingly improving the accessibility and opportunity of, what can be, a deeply savvy financial choice, but has become somewhat tainted by assumption and lack of useable remortgaging advisory sites in the past. Hopefully, this obstacle is now in the process of changing for good.