300,000 homeowners could save £3,500 on their mortgage payments by switching providers | Personal Finance | Finance

Households could save up to £5,200 a year on existing credit by switching to new financial providers, data from Experian has shown. As interest rates continue to rise, many people will be looking for for the best deals on their mortgages.

Experian revealed that homeowners alone could save £3,500 on their mortgage payments by switching to a new fixed rate two-year offer.

Nearly 300,000 people may be coming to an end of their current mortgage arrangements and could consider switching to cheaper deals.

As well as mortgage savings, Britons could save up to £1,200 by refinancing their cars and almost £500 by consolidating their debts with a balance transfer card.

To highlight the impact switching might have on their personal finances, Experian analysed data to calculate the savings a person might be able to make if they decided to switch to cheaper deals.

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Working with partner L&C Mortgages, Experian calculated that homeowners could save over £3,500 if they switch to a new fixed rate two-year offer. For instance, Britons with a £150,000 25-year mortgage loan on a lender’s standard variable rate (SVR) of 5.49 percent will have a monthly repayment of £920.24.

According to their calculations, the same mortgage on a two-year fixed rate remortgage deal of 3.24 percent will have a monthly repayment of £730.18, representing a saving of £4,561 over two years (£190.06 per month).

Taking the arrangement fee of £999 into account, this would still leave a homeowner better off by £3,562 over the two-year period.

The data revealed that nearly 300,000 homeowners could be coming to the end of their fixed term deal over the next three months, and without remortgaging they risk rolling over to their existing lender’s SVR, which may be more expensive.

After rates for new personal loans were increased by 22 basis points to 6.71 percent in June, a car owner with a £15,000 loan payable over four years will currently be making monthly payments of £355.81. And their total amount payable will be £17,078.78, including £2,078.78 interest.


However, Experian calculated in September that a customer could potentially cut £1,000 off their original deal if they decide to switch to a loan with a lower interest rate.

For example, there are loans with interest rates that start from 2.80 percent for the same loan amount and four-year period.

This means drivers could reduce the total amount payable to £15,861.95, with monthly payments of £330.46 and total interest of £861.954.

James Jones, head of consumer affairs at Experian told Express.co.uk: “With higher interest rates across the board than this time last year, you may be considering debt consolidation as an option to cut costs. Towards the end of last year, the most searched for loan products on the Experian site were debt consolidation loans, making up 36 percent of total searches.

“The most common form of debt consolidation is taking out one central loan to pay off existing debts, such as credit cards and other loans, rolling them up into a single, affordable monthly payment. If you secure a much lower interest rate on the new loan, it can help reduce the interest you pay, potentially allowing you to clear the borrowing quicker.

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“However, remember that if you extend the term of your borrowing (i.e. how long you’re making payments for) then even though the interest rate may be lower, you might end up paying more interest overall.”

He explained there are also a range of credit card balance transfer deals that could allow people to consolidate existing borrowing on to a single new card, potentially at zero percent for up to three years.

Whilst many of these deals are aimed at customers wishing to transfer existing credit card borrowing, some such as money-transfer cards can pay cash into one’s bank account, enabling the repayment of a wider range of borrowing.

Mr Jones mentioned another form of debt consolidation which is the process of shifting one’s existing borrowing such as credit cards and other loans to their mortgage.

The idea is that by paying off debts with high interest rates using a mortgage with a lower rate, the amount of the monthly payments will decrease.

However, even though mortgage rates are normally lower, they take longer to pay off resulting in people potentially paying more in the long run. Also, if people can’t keep up with their payments it could put their home at risk, so this is not a decision to be taken lightly.

He continued: “Aside from loan consolidation, another way for people to reduce monthly costs is by extending their mortgage term, so that they pay their balance off over a longer time.

“This reduces monthly payments, although you’ll pay more interest in the long run. A way around this is overpaying your mortgage once you’re in a better financial position and able to do so, as most mortgages let you overpay by 10 percent every year without extra charges.

“With all these options remember that it isn’t one size fits all, so consider your options and choose what works for your financial situation.

“If you’re thinking about using your mortgage loan to help manage your wider credit commitments, it’s wise to speak to a qualified fee-free mortgage broker for advice that’s specific to your circumstances.

“They can search for deals that suit you and could save you money, as well as make sure you’re fully aware of the pros and cons.”

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