Mortgage Payers Set To Pay Thousands More In Interest Payments
The Halifax has issued a recent warning to mortgage payers in the UK, claiming that many could be wasting as much as £7,500 over the term of their mortgage simply because of the way the interest is calculated on their mortgage loan. Experts from Halifax warned that if the interest on the mortgage is calculated on a monthly or annual basis, consumers will be liable to pay far more in the way of interest because the debt, and therefore the interest, on the debt falls much more slowly when interest is calculated in this way.
Over recent years, many reputable lenders have started calculating interest in mortgage loans on a daily basis, and this means that the debt falls more rapidly and therefore so does the interest charged on the debt. However, there are a number of lenders that still calculate interest on an annual or monthly basis, and this is where consumers in the UK could be losing out to the sum of thousands of pounds with no extra benefit.
The Head of Mortgages at Halifax, Mark Heaton, stated: "Daily interest saves customers a lot of money over the life of their mortgage and should not be overlooked when they are looking at which deal is the best for their circumstances. The clear message for borrowers is 'look beyond the headline rate'. Your mortgage should be offering you the best possible long term value." The benefit with mortgages that have interest calculated on a daily basis is that the debt and interest charged falls every twenty four hours, which can save a fortune for the consumer over the long term.
Consumers are advised to look at their existing mortgages and check how the interest is calculated. It may well be worth some consumers looking to change their mortgage provider in order to get a better deal. Applicants for new or first time
mortgage should also bear in mind the additional charges that could rise from a monthly or annual calculated interest rate, and take this into account when deciding which mortgage is most suitable.
Alisdair Milton
27th November 2006
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