The term ‘remortgaging’ is widely misunderstood, with three in five people unsure of its meaning, according to MoneySuperMarket.
The Financial Conduct Authority’s Mortgage Market Study estimates that 800,000 consumers are currently spending more on their mortgage than necessary and that switching could result in average annual savings of £1,000. Yet new research by the price comparison website suggests that uncertainty over the meaning of remortgaging could be holding borrowers back from realising such savings.
The research reveals the misconceptions around remortgaging, with 45% of people surveyed assigning negative connotations to the term, and one in five embarrassed to admit they’ve done it.
23% think you would only remortgage to borrow extra funds, while 8% believe you have to be in a ‘desperate’ situation to remortgage.
However, only 57% of those polled thought they had remortgaged their property, with 9% doing so for the purpose of releasing funds and 21% to get a better rate.
22% of those who have owned a house for between three to five years are embarrassed by the idea of remortgaging, compared to 15% of people who have owned their home for over 40 years – suggesting that those who have owned their home for longer have a better understanding of the role of remortgaging.
Top three remortgage misconceptions:
- You only remortgage if you need to borrow extra money (23%)
- You can only remortgage if your current deal is coming to an end (13%)
- There is a limit to how many times you can remortgage (11%)
Jameel Lalani, head of mortgages at MoneySuperMarket, said: “We’re used to talking about switching our energy supplier, current account or car insurance – but when it comes to our mortgage, for many it seems like an alien concept.
“It’s true that remortgaging can mean borrowing against your property – which might be an option for people who want to pay for home improvements or other debts. More often than not, it simply means changing your deal, either via switching to a new lender, or by moving onto a new deal with your existing lender. If you choose not to do anything, your lender will often move you on to its variable rate once your initial deal has finished – which is almost always less competitive.
“In light of that, it’s worth taking action and asking yourself should I stay, or should I go? Whatever the decision, it really pays to shop around, find the right remortgage deal for you and ensure you’re not unnecessarily overpaying.”