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Focusing on the headline rate is leaving mortgage borrowers thousands of pounds worse off, research from Legal & General Mortgage Club shows

25 May 2021

Full press release

  • Nearly two-thirds (63%) of UK borrowers say that the interest rate is the most important factor in deciding their next mortgage.
  • Analysis by Legal & General Mortgage Club shows that a borrower with a £250,000 mortgage who locks into a 5-year fixed rate product and then decides to move or remortgage could face as much as £10,891 in early repayment charges.
  • Yet, only 13% of borrowers see early repayment charges as being important to consider when getting their next mortgage.

UK borrower’s fixation with mortgage interest rates is leaving them susceptible to thousands of pounds in unexpected costs, because they are not considering the impact of other product factors, such as exit fees. The latest research from Legal & General Mortgage Club has found that most borrowers overlook the impact of factors like early repayment charges (ERC) when seeking a new mortgage.

Legal & General Mortgage Club, the UKs largest and longest-standing, has uncovered that nearly two-thirds (63%) of UK borrowers consider the interest rate to be the most important factor in deciding their next mortgage. However, analysis from the Club found that some borrowers could face thousands of pounds in extra costs if they wish to move to a new product before their existing fixed term ends.

A borrower that locks into a five-year fixed rate product and then decides to move or remortgage could face £10,891 in ERCs. Yet, only 13% of borrowers see ERCs as being important to consider when getting their next mortgage.

Kevin Roberts, Director, Legal & General Mortgage Club: "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."

Further information

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Max Chason

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T: 0755 715 6891

Email Max Chason

Notes to editors

Established in 1836, Legal & General is one of the UK's leading financial services groups and a major global investor, with £1.2 trillion in total assets under management (as at HY24) of which c40% (circa £0.5 trillion) is international.

We have a highly synergistic business model, which continues to drive strong returns. We are a leading international player in Institutional Retirement, in Retail Savings and Protection, and in both public and private markets through our Asset Management division. Across the Group, we are committed to responsible investing and dedicated to serving the long-term savings and investment needs of customers and society.

As at 11 December 2024, Legal & General has a market capitalisation of 13.7 billion.

Institutional Retirement works with trustees and sponsoring companies of defined benefit (DB) pension schemes of all sizes to settle their pension obligations and secure scheme members’ benefits, through a full range of buy-ins, buyouts and other de-risking solutions. Our Client Services’ 12-month rolling Net Promoter Score (NPS) is above +70, which is widely regarded as being at a “world class” level. Legal & General is the UK’s longest-standing active bulk annuity provider.

Our UK Retirement annuity book stands at an estimated £86.1 billion at 31 December 2023. Across the group over £30 billion is invested in direct investments that deliver positive social and environmental impacts, such as clean energy and affordable housing. Legal & General provides income and pension security to more than a million retirement customers around the world.

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