What Do The Terms APR AER And EAR Mean
Below is a MRR and PLR article in category Finance -> subcategory Mortgage.
Understanding APR, AER, and EAR: What You Need to Know
Summary:
People who switch mortgage lenders for better rates are often called "Rate Tarts" in a derogatory manner. However, a more accurate term might be "Shrewd Shoppers," as they seek to get more value for their money. In a competitive mortgage market, these savvy consumers benefit from lower rates by exploring options.
Article:
In the world of mortgages, some lenders refer to those who frequently switch for better rates as "Rate Tarts." However, a more suitable label is "Shrewd Shoppers." Why pay more for the same loan when you can find it cheaper elsewhere? After all, a loan from one lender is just as effective as a loan from another!
The mortgage market thrives on competition, and as long as lenders continue to use pricing as their primary marketing tool, consumers will chase the best deals. Feel free to call them Rate Tarts, but they’re saving money in the process!
To reduce mortgage switching, some lenders have increased their fees, while others have enhanced their customer retention programs. While excellent retention programs may win accolades, higher fees may merely reduce a lender's market share, despite offering higher profit margins. Lenders need to learn that incentives work better than penalties!
Take Birmingham Midshires, for instance. They offer a tempting 3.89% two-year fixed deal. However, the fine print reveals a hefty £1,499 arrangement fee, compared to the market average of £500. Spread over two years, this fee equates to an additional 0.75% interest on a £100,000 mortgage.
If you're considering remortgaging, you need to do a few things. First, calculate all associated costs: the valuation fee (around £250 for a £100,000 mortgage), the arrangement fee (usually £500), possible booking fees (£50?), legal fees (approximately £350), and any penalties for exiting your current mortgage.
Next, contact your current lender. Inform them that you’re exploring better deals. Lenders often assume that if they offer a somewhat appealing deal, customers will stay put to avoid the cost and hassle of switching. Test their offer strategy and see if they propose something better. If they simply offer you their standard variable rate, they may not deserve your business!
After evaluating the costs of switching, finding the best new deal you qualify for, and getting a quote from your current lender, you can make an informed decision.
Brokers Online is one of the largest finance websites in the UK, providing access to life insurance quotes and various financial services, including remortgages. For more information, visit "How Do I Know If I Should Switch Mortgages?"
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