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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

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Notes to editors

Established in 1836, Legal & General is one of the UK’s leading financial services groups and a major global investor, with international businesses in the US, Europe, Middle East and Asia. With almost £1.3 trillion in total assets under management*, we are the UK’s largest investment manager for corporate pension schemes and a UK market leader in pension risk transfer, alternative asset origination, life insurance, workplace pensions and retirement income. Through inclusive capitalism, we aim to build a better society by investing in long-term assets that benefit everyone.

* at 30 June 2021

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Our UK Retirement annuity book stands at over £85 billion as at 30 June 2021, of which over £25 billion is invested in direct investments that deliver positive social and environmental impacts, such as clean energy and affordable housing.

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(As of June 2021)