Most of us spend as little time as possible thinking about our mortgage. It's understandable, but it's also a huge mistake, because taking our eye off the ball can be horribly expensive. A new study has revealed that a third of us fail to spot when the introductory period on our mortgage ends - and we slip onto the mortgage company's standard variable rate (SVR).
It takes an extraordinary length of time for us to get round to doing anything about it - and as a result we're wasting thousands of pounds each.
The average SVR across the UK mortgage market is 4.49% - some 2.83% higher than the average initial discounted variable rate deal. It means that slipping onto this deal accidentally can be an extremely expensive mistake.
The study, by uSwitch found that homeowners who slip onto the SVR spend an average of 21 months on this rate - which is costing them an average of £2,445 in extra payments. Shockingly one in ten of them end up in even more debt because of the extra costs of an SVR.
In a period of low interest rates, they have not paid the price of mortgage interest hikes on top of the extra costs, but when rates do eventually start rising, those on SVRs will be particularly vulnerable - as lenders can push these rates up dramatically.
Why - and what can you do?
There are three issues here. The first, identified by uSwitch, is that people are simply not concentrating. Over four in ten people have no idea when their current deal runs out, and around the same number rely on the mortgage company reminding them when their deal is about to expire.
If they don't (and fewer than half of mortgage companies do this), then they let themselves slide onto much pricier SVR deals. As a result, a third of people don't realise that their initial deal had come to an end before it is too late to find a better option.
The answer here is simply to make a note in your diary for a month before your new deal ends, and set aside a few hours at that point to meet with a mortgage broker, or to scour the market yourself.
The second problem is that people are not getting round to finding a new mortgage - because they can't face it. The study found that 60% of people found hunting out a new deal to be stressful, over a third found it time-consuming, and a quarter found it confusing. Tashema Jackson, money expert at uSwitch.com, says this is what lenders are counting on. She explains: "Lenders rely on borrower apathy when it comes to mortgages - enticing them in with a competitive introductory rate and counting on them to stay put once the deal is over."
If you can set aside a few hours to check out what's available, you can start with a comparison site, and then contact competitive providers for full details.
If it feels overwhelming, it may be worth paying a mortgage broker to search the market for you. This may set you back a fair sum, but they will be able to find mortgage deals that aren't available direct to homeowners, so you may still be better off. You will need to decide whether the cheaper mortgage - and lack of hassle - is worth what your broker will charge.
The third issue, and not one mentioned by the study, is that plenty of the people who have fallen onto the SVR cannot apply for a more competitive mortgage - because they no longer qualify for one. This may be personal - especially if they have had issues with debts in the interim, or their circumstances have changed. Alternatively, it may be because of a rule change. In some instances lenders have tightened up the age limits on who they will lend to, while others have introduced stricter criteria for affordability.
If you find yourself in this position, rather than resigning yourself to the SVR, it is worth conducting a wider search of the market, and possibly using a broker. Just because your lender turns you down, you shouldn't always assume there's not another lender who is happy to offer a better deal to someone in your position.
Given that people find mortgages confusing, time-consuming and stressful, it's hardly surprising that they don't want to linger too long over their mortgage. However, if you are currently on an SVR, then a few hours of focus could leave you thousands of pounds better off. Surely that has to be worth it.