3m+ unaware of their mortgage rate

Over a quarter of mortgage borrowers in the UK do not know what interest rate they are paying.

Research carried out Post Office Mortgages found that more than 28% of mortgage borrowers, equivalent to more than three million people do not know their mortgage interest rate and simply assume that they are on the best deal.

More than a third (35%) of borrowers are currently paying their lenders Standard Variable Rate (SVR). In ordinary times this would be unusual.

Every lender sets its own SVR, loosely linked to the Bank Base Rate set by the Bank of England. Historically SVRs have not been the most competitive rates available, as lenders have offered better fixed rates, trackers and discounts to attract business.

When borrowers come to the end of a special deal such as a fixed rate or tracker, they are automatically placed on the SVR, also known as the ‘go to’ or ‘revert to’ rate. But in the past, savvy borrowers would then remortgage to another, better deal.

However, with Bank Base Rate being slashed to 0.5% a year ago, many lenders reduced their SVRs accordingly – indeed, some lenders have guaranteed that they will never set their SVRs at more than a particular margin above the Base Rate.

As a result, many borrowers are now sitting on their lender’s SVR, believing it to be the lowest rate available. For some people on guaranteed low SVRs that will be the case. But some lenders are charging more than 4% for their SVRs, and it could be that borrowers could get a much better deal elsewhere.

Post Office personal lending director, Marco Hughes, says:

"Although it might seem that staying on your current SVR is the easiest thing to do, you are much more vulnerable to interest rate rises.

“Some providers have increased their SVRs quite significantly even though the Bank of England Base Rate has not moved and as a result many borrowers are seeing their monthly mortgage repayments increase more quickly than they thought.

"If you're thinking about switching mortgage, now is the best time to do it, before rates rise further. With many SVRs at or above 4% there are already better deals to be had out there.

“Switching mortgage does not have to be a stressful experience and spending a bit of time searching and comparing deals could save you a significant amount of money in the long term."