The challenge has been laid at the feet of lenders to move to daily interest calculation, but som...
The challenge has been laid at the feet of lenders to move to daily interest calculation, but some have been slow to react.
Yorkshire Bank's general manager of personal financial services Paul Fegan says while "a lot of lenders claim to be heading towards daily interest calculation, only 38 or the approximate 133 UK mortgage lenders offer it as standard".
"Talk is cheap. Several lenders have introduced daily interest calculation on some of their mortgages but have yet to transfer many existing borrowers across to reap the benefits. Of those that have, some have even charged their customers for the privilege," Fegan says.
In recent research conducted by Yorkshire Bank 84% of homeowners thought it totally wrong that some lenders still insist on charging their customers interest on money they have already repaid.
As part of the research Yorkshire Bank calculated that a homeowner with a £59,000, 25-year standard repayment mortgage would save nearly £3000 simply by changing to daily interest calculation.
Commenting on the research findings Steve Worthington, Professor of marketing and financial services, Staffordshire University, says in an era where reductions in the base rate are more common then increases it is important to have a mortgage where interest is calculated daily.
"Since the abolition of MIRAS there are no longer any personal tax advantages in maximising a mortgage. Homeowners should concentrate on reducing the interest on their repayments, while at the same time increasing the flexibility, particularly as with low inflation, the real value of their mortgage debt is not being eroded by any other factor."
In 1997 Yorkshire Bank calculated that UK homeowners were being ripped-off to the tune of £73 billion in unnecessary interest payments due to annual interest calculation over the lifetime of their mortgages.
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