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Switch your mortgage to avoid a monthly payment hike of £200
If you roll onto your lender’s standard variable rate at the end of your current deal you could see your payments increase. Remortgage to a better rate instead
Borrowers could see monthly mortgage payment increases of £204 if they don’t secure a new mortgage deal at the end of their current one, said Moneyfacts.
The financial information provider said the average Standard Variable Rate (SVR) is currently 4.40%, meaning those coming to the end of a two-year fixed rate deal from 2019 (when average two-year fixed rates were 2.49%) could be facing a hike of 1.91% if they do nothing and revert to an SVR.
Five-year fixed rates
Those who took a five-year fixed rate deal in 2016 would see their pay rate rise by 1.62% if they rolled onto their lender’s SVR this year instead of remortgaging.
But if they do want to switch to another five-year rate, there’s good news as prices have fallen to an average of just 2.78%, 0.35% lower than when they last locked in to a deal.
Moneyfacts worked out that switching to a new five-year fix could reduce monthly outgoings on mortgage payments by around £175 per month compared to letting their mortgage roll over onto the SVR. Over the 60 months of a typical five-year fixed deal, that totals over £10,000 saved.
Sub-1% mortgage deals
Those with enough equity could potentially consider one of the record-low rated sub-1% mortgage deals currently on offer, and make even bigger savings by switching.
The difference between the lowest directly available initial rate on the market (a two-year fixed rate of 0.91%) and the average SVR is 3.49%, which could equate to an astonishing difference in monthly payments of over £350.
Eleanor Williams, finance expert at Moneyfacts.co.uk, said: “While undoubtedly the pandemic has had a polarising impact on many households and their income levels, our research shows that for eligible borrowers, this could be a prime time to consider a new mortgage.
“It would be wise for borrowers to confirm what options may be available to them for a new mortgage, even if perhaps their existing lender is unable to offer a new deal, as eligibility criteria and requirements vary from lender to lender. The support and advice of an independent adviser might find options which could save them significant sums and help to calculate the true cost to uncover the best options for individual circumstances.”