At the moment borrowers coming to the end of the average two-year fixed rate mortgage could pay as much as 2.5% more on their repayments if they lapsed onto their lenders’ standard variable rates (SVR).
The SVR is the default mortgage rate which lenders automatically switch borrowers onto when they finish a deal.
According to Moneyfacts.co.uk, which has been closely monitoring the fast-changing mortgage market, the average SVR is currently 4.46%. Meanwhile, the average two-year fixed rate mortgage is today at 2.05%.
Switching to a new deal, therefore, could save a borrower as much as 2.41%, according to Moneyfacts’ figures.
Increasing rates
The problem is lenders are starting to gradually increase their rates. In fact, on 1 July the average two-year fixed deal was 1.99% but now it’s increased a few notches to 2.05%.
Back in March, when the pandemic took hold, the Bank of England cut its interest rates to 0.10% and lenders soon followed and passed on their cuts to new borrowers. But now, with the landscape changing again, lenders are starting to increase rates.
Moneyfacts is concerned this trend will continue. Eleanor Williams, finance expert at Moneyfacts.co.uk, said: “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.
“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.”
Move quickly
“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.”
