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13 September, 2017

2.5 million UK home buyers pay too much for their mortgage

  • New analysis highlights the scale of Standard Variable Rate (SVR) over-payments
  • Tesco Bank automatically offers existing customers access to its competitive new business rates

New analysis of the mortgage market by Tesco Bank reveals that up to 2.5 million* UK home buyers may be over-paying on their mortgage as a result of slipping onto higher Standard Variable Rates (SVRs) at the end of their fixed rate period. With the typical SVR at 4.39% compared to the average 2 year fixed rate at 1.95%, these customers could be over-paying on their mortgage by up to £274 a month**. To help customers manage their money, Tesco Bank automatically offers existing customers access to the Bank’s competitive rates 12 weeks before the end of the fixed rate term.

Why does this matter?

Tesco Bank’s new Home Buyers research reveals that one-third of home buyers would need to reduce their discretionary spending should interest rates increase by 0.25% - equivalent to £21 per month on an average mortgage balance***.

Furthermore, the research reveals that while 62% of prospective home buyers are optimistic about their housing prospects – a reduction of 11% over the past 6 months – a third of prospective home buyers are more pessimistic, citing economic uncertainty, budgetary pressure, and the prospect of future interest rises as key concerns around purchasing their first home or moving house. 

David McCreadie, Managing Director, Tesco Bank said:

“Our goal is to reward the loyalty of our customers. Our latest home buyers research illustrates that customers continue to face many challenges when buying a home and so we give them a little help by offering our competitive rates when their fixed rate term comes to an end.

“Alongside our competitive mortgage rates, we are also launching a series of guides to help customers navigate some of the potential bumps in the road as they move into their new home – especially those who are moving home for the first time.

“Uniquely, customers can also collect Tesco Clubcard points on their mortgage repayments****, giving them access to a great range of Clubcard Reward Partners for savings on family fun, travel and eating out, which is especially useful having just moved home.” 

The home buyers research illustrates the considerable challenges customers face when purchasing their first home or moving house, notably:  

The ‘Bank of Mum and Dad’ is more relevant than ever:

  • Almost one-fifth (18%) of UK home buyers over the age of 40 are still relying on ‘The Bank of Mum and Dad’ to buy a home and typically receive more than £50,000 from their family, according to Tesco Bank’s latest research.
  • The research found that more than half (55%) of over 40s were given this financial support as a gift, while almost a third (28%) received it as a loan.
  • Out of all the age groups surveyed, under 30s were the most likely to require assistance from their parents or family to buy a home, with almost three-fifths (59%) receiving support from family.

Regional disparity continues to grow

  • Regionally, home buyers in the London area were most likely to depend on financial assistance from their parents or family to buy their home, receiving more than £63,000 on average. Home buyers in the East, Midlands and the North were among those least likely to receive a substantial amount of help from parents or family to fund their purchase, with those that did being given an average of around £20,000.
  • With the research finding that the average deposit for UK home buyers has now exceeded £61,000, those in the South East of England are typically making the largest down payments on their home, at an average of over £107,000, while those in the North East of England typically put down the smallest sums, with an average deposit of around £25,000.

The latest Tesco Bank Home Buyers Report can be viewed here. 

 The Tesco Bank home buying guides can be viewed here                                                                                             

ENDS

For media enquiries, please contact:

Tesco Bank Press Office

+44 (0)131 274 3630 / +44 (0)7595 441 036

 

Notes to editors:

Tesco Bank customers receive notification that their fixed term mortgage ends 12 weeks in advance. At this point they will be offered our most competitive rate.

* Tesco Bank analysis of CACI Data June 2017

**Tesco Bank analysis of Moneyfacts/UK Finance Data 1st September 2017

***Average mortgage balance of £178,235 at 1.99% increasing to 2.24%

****Tesco Bank Mortgage customers can collect one Clubcard point for every £4 on their monthly repayments. Points are not collected on any fees or charges paid separately from monthly payments. Points are also collected on overpayments, but not on any overpayment made to pay off the mortgage in full. Clubcard points will be added within 6 weeks of payment. The Tesco Clubcard Scheme is administered by Tesco Stores Limited, Tesco House, Shire Park, Kestrel Way, Welwyn Garden City, AL7 1GA, who are responsible for fulfilling points.

The Tesco Bank Home Buyers’ Survey was carried out by YouGov in July 2017 with 1,720 respondents.

Tesco Bank mortgages are subject to status and lending criteria.  Your home may be repossessed, as a last resort, if you do not keep up repayments on your mortgage.

About us:

Tesco Bank’s goal is to make banking and insurance easier and better value for people who shop at Tesco. We’ve been around since 1997 and today we help more than 6 million customers every day with everything from insuring their pets, to buying their first home.  Our 4,000 colleagues serve our customers seven days a week from our three main centres in Edinburgh, Glasgow and Newcastle, and we are also available through online and mobile banking 24/7. 

Tesco Bank is a trading name of Tesco Personal Finance plc. Registered in Scotland No. 173199. Registered Address: EHQ, 2 South Gyle Crescent, Edinburgh, EH12 9FQ. www.tescobank.com

 

 

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Media team

For journalist enquiries only, contact the Tesco Bank Press Office on:

+44 (0)131 274 3630
+44 (0)7595 441 036

 

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