Could you switch your mortgage and save £5K?
Up to 44% of the UK’s 10.8 million mortgages are likely to have reverted to the lender’s Standard Variable Rate (SVR), which can be more than double the interest rate of the original deal, according to Experian.
The credit reference agency revealed that many borrowers could save over £5,000 on their mortgage costs if they remortgage to a new fixed rate.
For example, a homeowner with a £150,000 20-year mortgage loan on a typical lender’s SVR of 4.75% will have a monthly repayment of £969.
The same mortgage on a typical two-year fixed rate remortgage deal of 1.25% will have a monthly repayment of £707, representing a saving of £6,288 (£262 per month).
Taking the arrangement fee of £999 into account, this would still leave a homeowner better off by £5,289 over the period.
Yet, just one in four (24%) current or previous mortgage holders remortgaged at the end of their last introductory mortgage offer.
Switch and save
Of those that have lapsed on to their provider’s SVR, almost a quarter (23%) told Experian they haven’t switched to a new deal because they thought remortgaging was too much hassle or too complicated, while 16% didn’t realise their SVR was more expensive.
The highest proportion of homeowners likely to be paying a SVR are in Northern Ireland (52%) and the North East (51%), while mortgage borrowers in the East of England, South East and South West regions are likely to have the lowest proportion of standard variable rate mortgages (43%).
Experian has launched a remortgage calculator to simplify the remortgage search process and make it easier for homeowners to find the best mortgage deals on the market.
Amir Goshtai, managing director of Experian Marketplace, said: “With so many other worries and stresses at this time, we wanted to make it much simpler for homeowners to find and switch to a better deal to help them with their finances. The Remortgage Savings Calculator makes it easy for people to check if they can save money on their mortgage, without impacting their credit score.
“The market is changing rapidly as lenders review their acceptance criteria and product ranges. This makes it particularly important to plan ahead and allow extra time to complete a remortgage, especially for higher loan-to-value ratios, and to use a broker or eligibility service to help you find the right lender.”
Homeowners with concerns about paying their mortgage during the coronavirus pandemic should speak to their lender as soon as possible. Lenders are being flexible and offering support to help their customers, including payment holidays.