The savings homeowners can make by remortgaging have reached their highest level in 11 years, according to new research.
Homeowners could save more than £3,000 a year by opting for a new fixed rate mortgage deal rather than staying on their lender’s standard variable rate (SVR), according to the latest Moneyfacts UK Mortgage Trends Report.
Widening gap between fixed rates and SVRs
Many borrowers locked into highly competitive two-year fixed rate deals in early 2017 but are now moving onto much steeper SVRs unless they take action.
In January 2017, the average two-year fixed mortgage rate was 2.31%, said Moneyfacts, whilst the typical SVR now stands at 4.90%. Unless homeowners remortgage, this means they’ll face a 2.59% uplift in the rate they must pay, which in many cases could add hundreds of pounds to monthly mortgage costs. The spread between fixed rates and SVRs is the widest it’s been since February 2008.
For example, someone with a £200,000 25-year repayment mortgage would see their monthly payments increase by £279.34 a month, equivalent to £3,352.08 over a year, if they moved onto their lender’s SVR at the end of their fixed rate deal.
Millions paying more than they need to
Despite the significant savings that can be made by remortgaging, millions of homeowners continue to languish on their lender’s SVR.
Our own L&C research found that more than 4m households are still on their lender’s SVR.
If you’re one of them, or you’re approaching the end of your current mortgage deal, you should review your options as soon as possible. Remember that even if your existing mortgage has early repayment charges, you can still secure your next mortgage, as many remortgage offers are valid for between three and six months from the date they’re issued.
Arranging your next mortgage in advance means you can move straight from one deal to another without moving onto your lender’s SVR. It also means you’ll be able to take advantage of current competitive mortgage rates.
Incentive to remortgage at 11-year high