Save £25,000 over 10 years by fixing your mortgage rate
Borrowers on their lender’s Standard Variable Rate (SVR) could save tens of thousands of pounds over a decade by moving on to a 10-year fixed rate, analysis has found.
Homeowners stand to chop an average £229 a month off their mortgage interest bill by swapping an SVR for a long-term fix, Private Finance’s research showed.
If the savings were used to make overpayments, borrowers could pay off their mortgage five years earlier. It is estimated around two million mortgage borrowers have been on SVR rates for six months or more at an average rate of 4.33% paying a typical £620 of interest each month.
By comparison the average 10-year fixed rate is 2.73% with monthly interest of £391.
Shaun Church, director at Private Finance, said: “Borrowers lingering on their lender’s SVR will find themselves subject to much higher than average interest rates. “When it comes to mortgages, it pays to be proactive, so swapping to a new deal as soon as the initial offer ends is recommended.
“Our analysis shows the savings from doing so can run into tens of thousands of pounds over the course of a typical mortgage term, making it well worth the effort. Ten-year fixes offer a decade of immunity from future rate rises for a relatively affordable price, as the price gap between shorter and long-term fixes has been narrowing in recent years.
“Although taking on such a long commitment won’t be for everyone, borrowers looking to ensure financial stability for the foreseeable might well be tempted to switch to a 10-year deal.”