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REMORTGAGING TO A FIXED RATE DEAL COULD SAVE HOUSEHOLDS ON A STANDARD VARIABLE RATE UP TO £371 A MONTH

Published: 08/06/2022
  • Switching from a standard variable rate to a five-year fixed rate mortgage deal could reduce monthly repayments by up to £371 per month 
  • According to the latest Bank of England and Moneyfacts figures, the average SVR rate is 4.78%, while the average two-year and five-year fixed rate mortgage is 1.78% and 1.95% respectively   
  • In light of the current squeeze on household finances, comparethemarket.com is urging homeowners who are either coming to the end of their initial rate, or are already on a standard variable rate mortgage, to switch and save money

30 May 2022 – With the recent Bank of England base rate increase from 0.75% to 1%, new analysis by comparethemarket.com finds that UK homeowners on a standard variable rate mortgage (SVR) could save up to £371 a month to combat rising living costs by switching to a fixed-rate mortgage deal, the equivalent of £4,452 a year. 

Instead of being automatically moved or staying on a lender’s SVR once a fixed-term deal ends, borrowers could save thousands of pounds by remortgaging. The average five-year fixed mortgage rate is 1.95%, according to the latest Bank of England data. By contrast, the average SVR rate is around 4.78% according to Moneyfacts data. The difference between the average SVR and five-year fixed rate mortgage deal stands at 2.83%. 

With the average mortgage debt in the UK just over £237,000, homeowners who are soon coming to the end of a two-year fixed mortgage could begin paying £391 more each month when rolled onto a lender’s average SVR rate, jumping from an average of £850 to £1,241. 

At a time when interest rates and living costs are rising, comparethemarket.com is urging homeowners who are either coming to the end of their initial fixed rate, or are already on a standard variable rate mortgage, to see if they could remortgage and save a significant account of money on one of the largest outgoings for many UK households.  

 

SVR rate

Based on latest Moneyfacts data, May 2022

Two-year fix rate

Based on BoE latest available data, 31 March 2022

Five-year fix rate

Based on BoE latest available data, 31 March 2022

Average interest rate

4.78%

1.78%

1.95%

Monthly repayments

Based on average mortgage debt of £237,206 per household

£1,241

£850

£870

Annual repayments

£14,892

£10,200

£10,440
 

Total annual saving compared to SVR:

£4,692

£4,452

Please note this table is a rate comparison only. It does not take into account individual circumstances and additional product fees as these vary by lender and product. Additional fees may be added onto the final loan amount. When considering remortgaging, it is worth asking for a breakdown of any additional costs by getting in touch with your lender.  

Alex Hasty, director at comparethemarket.com comments: 

“The rising cost of living is squeezing household finances and it’s becoming harder for families to manage day-to-day spending. One of the areas where households could try to save money is checking their biggest monthly outgoing – usually a mortgage. If you’re on a lender’s standard variable rate, you’re likely to be overpaying. At a time when interest rates are rising, borrowers who remortgage onto a fixed-rate mortgage product not only have peace of mind on set monthly outgoings but could also save a significant amount of money in the process. 

“We encourage homeowners who are either coming to the end of their initial rate, or are already on a standard variable rate mortgage, to look online and see if they could save money by comparing mortgage products and remortgaging. We also suggest comparing policies on existing bills, such as motor and home insurance, to mitigate broader financial pressures. Households could save an average of £150 if they switch to the cheapest motor and home insurance providers.”

For further information about mortgages, please visit: https://www.comparethemarket.com/mortgages/.  

Notes to editors

UK homeowners on a standard variable rate mortgage (SVR) could save up to £371 a month by switching to a fixed-rate mortgage deal, the equivalent of £4,452 a year:

  • Average SVR cost per month = £1,241

  • Average two-year fix per month = £850

  • Average five-year fix per month = £870

  • Monthly difference based on five-year fix: £1,241-£870 = £371

  • Annual difference: £371 x 12 months = £4,452

Calculations based on the average mortgage debt of £237,206 and on a 30-year term repayment basis. Please note these Bank of England figures represent the average rate in March 2022 and latest avaliable data. This rate is liable to change over time given potential fluctuations in the Bank of England’s interest rate.
 

Average UK mortgage debt of over £237,000:

  • FCA : The outstanding value of all residential mortgage loans was £1,613 billion at the end of 2021 Q4 (Mortgage Lending Statistics – published March 2022)

  • ONS Subnational estimates of dwellings and households by tenure, England: 2020 : There are currently 6.8 million UK outstanding mortgages (published January 2022)

  • £1,613 billion / 6.8 million mortgages = average mortgage debt outstanding of £237,206 per household

Motor and home insurance data is sourced from comparethemarket.com (January 2022 - March 22)
 

About comparethemarket.com  

comparethemarket.com was launched in 2006 and has grown rapidly over the past sixteen years to become one of the UK’s leading price comparison websites.
 

comparethemarket.com provides customers with an easy way to make the right choice for them on a wide range of products including motor, home, life, travel and pet insurance as well as utilities and money products such as credit cards and loans.

comparethemarket.com actively works with its brand partners to help provide great services to customers.
 

comparethemarket.com is a trading name of Compare The Market Limited. Registered in England No. 10636682. Registered Office: Pegasus House, Bakewell Road, Orton Southgate, Peterborough, PE2 6YS. Compare The Market Limited is authorised and regulated by the Financial Conduct Authority for insurance distribution (Firm Reference Number: 778488). Energy and Digital products are not regulated by the FCA.