If you're coming to the end of a fixed mortgage term, you're faced with two options – remortgage to a new deal, or revert to your lender's standard variable rate (SVR). Unfortunately, far too many homeowners opt for the latter and end up on a higher interest rate, and could be paying thousands of pounds too much each year.
That's according to research from L&C Mortgages, which found that 36% of homeowners (equating to around 4 million people) are sat on their lender's SVR and paying higher interest rates as a result, and there are concerns they could see their payments ramp up even further when base rate eventually rises.
The research also discovered that an estimated 1.1 million households are wasting £2.78 billion every year by sitting on the wrong mortgage deal, while 30% of respondents don't even know the current interest rate on their mortgage. As a result, they could be overpaying without even realising it – L&C found that, by switching to a better deal, homeowners could save an average of £216 every month, equating to an annual saving of £2,590, yet 58% have never remortgaged to save money.
Why would you want to waste that kind of cash by staying on an SVR? Don't be one of the 58% – compare the top remortgage deals and see how much you could save!
"It's worrying to see so many people still on a Standard Variable Rate mortgage as they are not the cheapest rates available," said David Hollingworth from L&C Mortgages. "Not only is there a lack of awareness around how much could be saved, but worse still, a huge number of people have never even tried to remortgage to get a better deal.
"With the cost of living on the rise and day-to-day expenses like energy prices soaring, it is hugely concerning to see that people are paying so much more than they should be. Our research shows that while homeowners believe they are paying too much for their mortgage, they still aren't taking action to cut their monthly payments … the chances are they could potentially save hundreds or even thousands of pounds a year by re-mortgaging to a new deal."
The research backs up our own findings, which revealed that those approaching the end of a two-year mortgage deal could face the highest interest rate jump in eight years if they reverted to their lender's SVR.
After all, those who took out a typical two-year mortgage in March 2015 would have had an average rate of 3.06%, yet if they reverted today, they'd be put on an average SVR of 4.56% – an increase of 1.50%. Conversely, if they remortgaged to the current average two-year mortgage rate of 2.33%, they'd see a rate cut of 0.73%.
Seems like a pretty simple decision, so whether you're approaching the end of a fixed rate deal or are already on your lender's SVR, it's high time you started seeing what else is out there. The top two-year mortgage currently boasts a rate of just 1.19%, and it couldn't be easier to get things underway. Head to our mortgage and remortgage Best Buys to get an idea of the kind of options available, and you'll soon see why it could pay to remortgage than revert.
As David Hollingworth concluded: "A mortgage is likely to be someone's biggest monthly outgoing, and in only a few easy steps they could get a better deal. It's crucial that homeowners regularly review their mortgage to see how their rate stacks up against the record low rates that alternative deals currently offer."
Use our mortgage calculator to find the best remortgage deals and see how low your repayments could be
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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