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Switch your mortgage and save over £3.5K

Christina Hoghton
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Christina Hoghton

Failing to switch your mortgage at the end of your current deal could increase your monthly repayments significantly

A third of those impacted financially by the pandemic are planning to revert to their lender’s Standard Variable Rate rather than seek a new mortgage deal, according to research from Legal and General.

But according to Moneyfacts this lack of action could cost them thousands of pounds in higher monthly repayments.

The financial information provider said that those coming to the end of a two-year fixed rate deal taken in March 2019 when the average rate was 2.49%, could face a rate hike of nearly 2% if they revert to their SVR. Instead they could potentially save over £3,500* if they were to secure a new two-year fixed rate deal today.

Borrowers coming off a five-year fixed rate deal from 2016 could reduce their outgoings on mortgage payments by over £130 per month by taking another five-year fix rather than reverting to SVR. Over the 60 months of a typical five-year fixed deal, that could total over £8,000* saved.

Eleanor Williams, finance expert at Moneyfacts.co.uk, said: “Rolling over onto an SVR could cost borrowers thousands of pounds more in monthly repayments. In fact, the difference in rate is near 2% and depending on how much equity someone has in their home, they may be able to get a two-year fixed rate deal lower than 2%. Those who fix now could also protect themselves from future interest rate rises and ensure a stable monthly mortgage repayment they can budget to.”

*Calculations based on an outstanding mortgage balance of £150,000, over 25-year term and overall average two- and five-year fixed rates for March 2021 (2.57% and 2.75%), compared to average SVR of 4.41%.