Home in to achieve the biggest saving

PARENTS are generally pretty savvy at saving money – but huge numbers are missing out on thousands of pounds because they fail to switch their mortgage.

Exclusive research for Your Money shows four out of five parents take packed lunches to work and seven out of 10 say they have bought second-hand toys or clothes for their children to save a few pounds here and there.

But while eight out of 10 have switched to a cheaper energy deal, changed their car insurance and their mobile or broadband contract, half have not changed their mortgage in the last three years, according to a survey from Mumsnet and digital mortgage broker Habito.

This mortgage stagnation is costing many homeowners hundreds, if not thousands, of pounds per year.

HSBC recently found those on their lender’s standard variable rate could find themselves overpaying by more than £4,000 a year, compared to switching to a fixedrate deal.

A £300,000 loan on an average 3.74% SVR costs £1,541 a month, compared to £1,150 on a two-year fix at 1.14%. Lenders’ standard variable rates should be a last resort as the rates are high, compared to some of the rockbottom deals currently available.

Many people end up on SVRs when a mortgage deal comes to an end often because they haven’t realised, or because they find the whole issue of mortgages far too complex.

Almost half of people said they would need to research the meaning of the term loan-to-value, which is the size of the mortgage compared to the value of the property.

A third would need to do the same for standard variable rate, the default mortgage rate borrowers end up on when a deal comes to an end.

And a quarter say they would have to look up base rate – the interest rate set by the Bank of England which many mortgage rates are based around, and which can affect monthly mortgage repayments on non-fixed-rate deals should it rise or fall.

The type of innovation that other areas of financial services have undergone has been noticeably absent from the mortgage market. This can mean that switching remains out of reach for busy parents.

Three-quarters say that trying to arrange meetings or calls to organise personal finances is incredibly difficult when you have children to look after. More than half had spent hours on hold when trying to manage their finances on the phone, and similar numbers had to take a child with them to a faceto-face meeting because they had no other option.

Daniel Hegarty, chief executive and founder of Habito, says parents must identify where the biggest financial wins are and capitalise on them.

He said: “Most families are constantly assessing their financial priorities and this often means pressure to save money on discretionary items.

“As our research shows, the ingenuity of parents saving money is incredible. However, all too frequently, they are deterred from making one of the biggest household savings possible by an industry that has failed to embrace change and that remains unnecessarily complex and opaque.”

They are deterred from making the biggest household savings possible