Revealed: How to reduce your mortgage payments by £257 a month
Households on their lender’s standard variable rate (SVR) with an average mortgage debt of £257,754 could save up to £257 a month by remortgaging to a fixed rate deal, according to a comparison site.
Compare The Market calculated that switching from a SVR to a five-year fixed rate mortgage deal could reduce monthly repayments by up to £257 per month, or £3,084 a year, based on an average mortgage debt.
According to the latest Moneyfacts figures, the average SVR rate is currently 7.85%, while the average two-year and five-year fixed rate mortgages are priced at 6.85% and 6.37% respectively.
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Borrowers are typically moved to their lender’s SVR once their fixed rate ends, with many finding their monthly payments increase significantly. According to the Office for National Statistics (ONS), more than 1.4 million households with a fixed rate mortgage will be coming up for renewal in 2023.
Remortgaging to a fixed rate will save most homeowners money, despite fixed rates being historically high. In August 2022, the average two-year fixed rate was 3.95% – compared to 6.85% now, a 2.9 percentage point increase.
The current average five-year fixed mortgage rate is 6.37%, according to the latest Moneyfacts’ data. By contrast, the average SVR rate is about 7.85%. This means the difference between the average SVR and five-year fixed rate mortgage deal stands at 1.48%.
Alex Hasty, director at Compare the Market, said: “We understand it’s a difficult time for many homeowners, as SVRs and fixed-term rates continue to be a lot higher than they were even a year ago. Another rate rise from the Bank of England also means many are feeling concerned about how this will impact their mortgage payments further. Those soon coming to the end of a fixed rate deal may likely see their monthly repayments go up significantly, even if they’re planning to move onto a new fixed deal.
“For most homeowners, finding a new fixed deal on your mortgage when your current one comes to an end, as opposed to moving onto your lender’s standard variable rate, could be a way to secure a more preferable interest rate and also helps ensure you have a clear idea of your monthly outgoings.
“A mortgage is often a household’s biggest outgoing, so it’s important to compare mortgage products online – checking the available deals now and staying aware of what is happening in the market to help you prepare and save for the future.’’