Time to switch your mortgage? Homeowners on a standard variable rate can save over £2,300 a year by remortgaging

Published: 03 JULY 2020
  • Switching from a standard variable rate to a fixed mortgage deal could reduce monthly payments by nearly £200 per month.
  • There are approximately 800,000 borrowers on a long term SVR rate.
  • comparethemarket.com is urging consumers who are either coming to the end of their initial rate, or on a standard variable rate mortgage, to switch their mortgage and save money.

30 June 2020 – New research by comparethemarket.com finds that homeowners on a standard variable rate mortgage (SVR) could be paying over £2,300 a year more in comparison to those on the average two-year fixed mortgage deal. There are approximately 800,000 borrowers  who have been on a standard variable rate for more than six months. If they all switched to a competitive deal it could equate to nearly a £2 billion saving nationwide.
 
Now that the property market is beginning to open up, following the shutdown due to COVID-19, and physical valuations can take place, borrowers could save thousands of pounds each year by re-mortgaging onto a cheaper fixed rate deal, instead of being automatically moved onto a lender’s SVR once a fixed term deal ends.
 
The average mortgage debt in the UK is just over £135,000. The average two-year fixed mortgage rate is 1.42%, according to the latest Bank of England data. By contrast, the average SVR today is 4.09%. Homeowners coming to the end of a two-year fixed mortgage and rolling onto an SVR would therefore pay £193 more each month, jumping from an average of £465 to £658.
 
For borrowers on low LTVs, for example 60% and below, rates can start from just 1.2%.  Based on the average mortgage debt of £135,000, individuals with low LTVs could save over £2,500 a year by switching away from their lenders SVR. 

  SVR rate Two-year fix rate
Average interest rate
Based on BoE latest available data, March 2020
4.09% 1.42%
Monthly repayments
Based on average mortgage debt of £136,273 per household
£658 £465
Annual repayments £7,896 £5,580
  Total annual saving £2,316

**Please note this table is a rate comparison only. It does not take into account 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.

Mark Gordon, director of money at comparethemarket.com, said:

Languishing on a lender’s standard variable rate mortgage is likely to cost you thousands of pounds more than you need to pay. By re-mortgaging, the money could instead be put into savings or could be put away in preparation for any emergencies or to build up rainy day funds. While there are fewer mortgage products available on the market than usual at the moment, with the housing market slowly restarting again and physical property valuations able to take place once more,  there are still plenty of good rates to choose from by looking around online.

Notes to editors
 
Calculations

Figures calculated using Bank of England data

There are approximately 800,000 borrowers on standard variable rate mortgage products in the UK

Average UK mortgage debt of over £135,000:

Homeowners on an SVR paying over £2,300 more a year compared to borrowers on average two-year fix deal:

  • BoE data: Average standard variable rate is 4.09% (March 2020)
  • BoE data: Average two-year fix is 1.42% (March 2020)
  • Costs have been calculated via Nationwide mortgage payment calculator, based on mortgage term of 30 years 
            o Average SVR cost per month = £658
            o Average two-year fix per month = £465
  • Monthly difference £658-£465 = £193
  • Annual difference: £193 x 12 months is £2,316

These figures represent the average rate in March 2020. This rate is liable to change over time given potential fluctuations in the Bank of England’s interest rate. 
 
Please note the table is a rate comparison only. It does not take into account 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. 

These individuals could save over £2,500 a year by switching away from their lenders SVR

  • BoE data: Average standard variable rate is 4.09% (March 2020)
  • Moneyfacts data: 1.21% cheapest 60% LTV deal available
  • Costs have been calculated via Nationwide mortgage payment calculator, based on mortgage term of 30 years

    o Average SVR cost per month = £658
    o Cheapest two-year fix per month at 1.2% = £451
        
  • Monthly difference £658-451 = £207
  • Annual difference: £207 x 12 months is £2,484

A typical mortgage term is around 30 years

£2 billion saving

  • 800,000 borrowers on standard variable rate products x £2,316 = £1.85

About comparethemarket.com

comparethemarket.com was launched in 2006 and has grown rapidly over the past fourteen 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. Compare The Market Limited is authorised and regulated by the Financial Conduct Authority for insurance distribution (FRN: 778488) and is registered with the Financial Conduct Authority under the Payment Services Regulations 2017 (FRN: 911617) for the provision of payment services.