Interest Rate Imbalance

Borrowers who have mortgages that are too small in value to qualify for low interest rates are forced to stay with both the mortgage products and the mortgage lenders they currently have.

Such borrowers are usually low income earners who may also suffer from adverse credit and therefore cannot qualify for the best mortgage products from the best mortgage lenders.

As a result, these borrowers are forced to pay high interest rates, which in turn boost the mortgage lenders' profits, allowing them to give discounts to their prime borrowers.

The borrowers who qualify for the discounted mortgage products are usually those who can afford to pay the higher rates. Instead, they are able to take advantage of the lower rate products that are typically offered to new customers or those that are looking to remortgage to other mortgage lenders.

This scenario has created an inequality between wealthier borrowers and poorer home owners.

Added to this is the problem of high-street mortgage lenders constantly chasing new business and therefore having to pay mortgage brokers vast amounts of procuration fees for the mortgages they complete.

This is an additional cost to the mortgage lenders that must be paid for. It is likely that a large portion of this expense is funded by the borrowers who are stuck on the mortgage lenders' Standard Variable Rates (SVRs), which are normally attached to the mortgage products held by poorer borrowers.

While such an inequality is a cause for concern within the mortgage industry it is unlikely that the situation will improve. It is doubtful that mortgage lenders would alert their less fortunate customers that they may be able to switch mortgages to a product that can save them money.

Borrowers who feel they may be paying over the odds on their mortgage should consult an independent mortgage adviser. An independent adviser will provide impartial advice on which mortgage products and mortgage lenders are right for an individual's set of circumstances.

In this day and age of choice in the mortgage marketplace, there is little need for borrowers to stay with the same mortgage lenders and pay excessive interest rates.

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