It's a great time to be a borrower at the moment. Mortgage rates are at record lows while the number of products available is approaching an all-time high, giving you plenty of great low-rate deals to choose from. It isn't only good news for those buying their first home or thinking of heading up the ladder, either – if you're approaching the end of a fixed rate deal, there's now extra motivation to remortgage…
A couple of months ago we let you in on the finding that it was far cheaper to remortgage to a new deal than to revert to your lender's standard variable rate (SVR), and Moneyfacts' latest figures show that this still holds true – but to an even greater extent!
Our research shows that the average standard variable rate (SVR) fell by 0.01% this month to 4.84%, which is still far higher than the average two-year deal (2.87%) and should in itself should be enough to make you consider remortgaging. But, the figures also show that the difference between the average SVR and the average two-year fixed rate in June 2013 is growing, which should create further motivation.
If you had taken a typical two-year fixed rate mortgage in June 2013, you'd have paid an average rate of 3.72%. This means that, if you now chose to revert to your lender's typical SVR, you'd face a rate increase of 1.12%, a notable rise from the 1.05% difference recorded over the past two months.
Conversely, if you remortgaged to a typical two-year deal right now, you'd be able to enjoy a rate cut of 0.85%. Pay over a percentage point more to revert, or remortgage to a cheap deal and pay less – it's a no-brainer! A quick calculation highlights how much better off you could be.
Let's say you've got a mortgage balance of £150,000 and were on a rate of 3.72%. This would result in interest payments of £465 per month (£5,580 per year), a figure that would rise to £605 per month (£7,260 per year – almost £1,700 more) if you reverted to a typical SVR. Conversely, if you remortgaged to an average two-year fix, your monthly interest payments would drop to just £358.75 (£4,305/year). That's a huge saving!
As you can see, the typical borrower will find it far cheaper to remortgage than revert, and it looks as though many are taking it on board. The most recent figures from the Council of Mortgage Lenders show that remortgaging activity is improving, as in March, the number of remortgage loans advanced (26,600) posted an increase of 19% on a monthly basis and 6% year-on-year, while the value of that lending (£4.2bn) saw an increase of 24% and 14% respectively.
Our figures suggest that there's every possibility of this trend continuing, so why not get in on the action? The gap between the average SVR and your previous fixed rate deal is only going to grow, but current rates can't keep falling forever. It's time to take action – start comparing the top remortgage deals to get an idea of what's out there, and see just how much you could save.
Disclaimer: Information is correct as of the date of publication (shown at the top of this article). Any products featured may be withdrawn by their provider or changed at any time.
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