Customers should look beyond headline rates, says Halifax

Halifax, the largest mortgage lender in the UK, has said that borrowers should make an effort to look beyond the headline rates offered by providers and stressed that many homeowners are currently missing out on the benefits of daily interest.

According to the bank, the majority of lenders switched to daily interest nearly five years ago, but there are still almost 20 companies who calculate new mortgages on an annual or monthly interest basis.

Daily interest calculations offer a benefit to customers as they allow payments made to be directly applied to the account, reducing the overall debt and the amount of interest charged.

Halifax offers the example of a person with a £200,000 mortgage on a standard variable rate of seven per cent. This person would repay a total of £421,689 over 25 years on a daily interest basis, compared to £429,054 with annual interest.

"The clear message for borrowers is ‘look beyond the headline rate’.  Your mortgage should be offering you the best possible long term value," said Mark Heaton, head of mortgages at Halifax.

"Daily interest saves customers a lot of money over the life of their mortgage and should not be overlooked when they are looking at which deal is the best for their circumstances."

Using data from Moneyfacts, Halifax has "named and shamed" the lenders who charge interest on a monthly or annual basis, with a number of regional building societies such as Kent Reliance, Stroud & Swindon, Manchester and Scarborough among them.