UK homeowners overpaying by £2bn on SVR mortgages
Are you one of the 800,000 households paying £200 a month more than you need to on a standard variable rate mortgage deal?
Around 800,000 UK households are overpaying on their mortgage to the tune of £2,300 a year, when they could easily switch to a cheaper rate.
Compared to borrowers on the average two-year fixed rate deal, those languishing on standard variable rate mortgage (SVR) terms are shelling out almost £200 extra every month.
Comparethemarket.com figures show how re-mortgaging on a more competitive, fixed rate deal could save hundreds of thousands of borrowers a collective £2 billion over a year – money that could be put away for emergencies and valuable rainy day funds.
Interest terms disparity
Homeowners who reach the end of a fixed rate deal are usually moved automatically onto their lender’s SVR – and it’s here that they’ll notice a significant change in their monthly payments.
In March 2020, the average SVR rate stood at 4.09%, compared to the average two-rate fixed rate of 1.42%, according to the Bank of England.
With average mortgage debt standing at just over £135,000 – borrowers could go from paying £465 a month on their fixed rate to £658 on an SVR.
So homeowners auto-rolling onto an SVR need to account for an extra £193 each month – underlining the value of shopping around for a new, fixed rate offers.
Property market reopen for business
As the property market slowly kicks back into gear – with physical valuations able to take place – there’s never been a better time to start re-assessing your mortgage options, whether you’re already on an SVR mortgage, or coming to the end of a fixed rate deal.
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.”