Published On: Sun, Jan 6th, 2019

£1,600: The price we pay for not switching to cheaper deals

Overall, Britons’ financial “paralysis” will cost them £18.7billion, economist David Hillier has calculated. Failing to change cards or consolidate credit card debts costs customers £10.5billion a year alone. And not moving to a cheaper personal loan incurs a £5.7billion penalty per year while mortgage payers not on a fixed-rate deal are losing £2.5billion annually, he said.

Professor Hillier, of Strathclyde Business School, said: “The scale of personal finance paralysis and its impact on households and the economy is cause for concern.

“Consumers aren’t entirely rational, and financial decisions are influenced by the information available to them, cognitive limitations and the finite amount of time available to make a decision.

“Many consumers operate under the assumption that making no decision is preferable to making the ‘wrong’ decision.

“But by failing to pull the trigger, consumers lose thousands of pounds.”

His research, sponsored by online lending group Freedom Finance, found that 45 percent of Britons feel overwhelmed or anxious at the idea of making important money decisions.

This led to 38 percent regularly delaying or not making the right choices.

Younger generations are twice as likely as baby boomers to suffer from personal finance paralysis.

Almost half of 18 to 24-year-olds and 50 percent of 25 to 34-year-olds admit to feeling nervous or apprehensive about dealing with a mortgage or a loan.

Only 22 percent of those aged 55-plus feel the same.

On average, people comparing personal finance options begin to feel overwhelmed by the process and give up after just 21 minutes, the survey found.

It also found that a quarter of consumers avoid making personal finance decisions because they worry they will not qualify for a lending product and their credit score will be affected.

Brian Brodie, chief executive of Freedom Finance, said: “Consumers seeking financial lending products feel blinded by choice.

“Our industry must tackle personal finance paralysis by providing tailored options for individual consumers,” he added.

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