Mortgage Payers Advised to Switch to Save Thousands
Experts are advising homeowners approaching the end of their two-year fixed rate periods to consider switching to a new deal, rather than automatically transitioning to their lender’s SVR (standard variable rate).
According to Moneyfacts.co.uk the average mortgage payer could save on average 1.93% on their mortgage payments by taking action at the opportune moment.
Data suggests that while the average two-year fixed mortgage rate was 2.53% in July 2018, today’s average SVR is around 4.46%. Consequently, those who allow their loans to be automatically switched to the lender’s SVR can expect an average increase in their mortgage repayments of 1.93%.
This would mean that for a mortgage payer with outstanding balance of £250,000 and 23 years left on their term, their monthly repayments would be £1,449.99 on an SVR mortgage of 4.46%.
Moneyfacts.co.uk reports that two-year fixed rate loans are today being offered at an average of 2.05%, a full 2.41% less than today’s average SVR. This would therefore mean that if the same homeowner above switched to a 2.05% two-year fixed rate deal, they would face a much lower monthly repayment of £1,136.82.
This would subsequently save them £313.17 per month, accounting to a huge £3,758.04 saving over the course of a year.
A Temporary Window for Significant Savings
While there is still plenty of scope for homeowners to make huge savings by switching at the right time, market movement suggests the window may be closing. Two-year fixed rates are slowly but steadily rising, gradually eroding the savings that could be made by switching at the opportune moment.
“With the average SVR likely to remain more static moving forwards and the mortgage market itself remaining fluid, as lenders continue to amend their ranges in reaction to an ever-evolving landscape, there is no guarantee that rates will not continue to increase,” commented Eleanor Williams, finance expert at Moneyfacts.co.uk.
“However, as there remains an almost 2.50% difference between the average SVR and the average two-year fixed rate today, the benefits of switching speak for themselves, as being able to save significantly on monthly outgoings could be more important than ever in these uncertain times,”
“Those who wish to explore whether they are able to reduce their rate, and consequently their monthly mortgage payment, would do well to move swiftly,”
“As with any financial commitment, seeking advice from an independent, qualified adviser has never been more relevant, as understanding the true cost of any new deal, taking into account any fees and incentives, and indeed keeping up-to-date on the available products and criteria could be made significantly easier with assistance from a professional.”