This is the message from Comparethemarket, which is warning borrowers if they don’t remortgage they will automatically start paying their lender’s revert rate and this could be even higher and more expensive.
The message comes after the price comparison site quizzed homeowners about their feelings in light of the current economic turmoil.
In the last few weeks mortgage rates, which were already on an upward trajectory following seven consecutive interest rate rises, soared further following the recent financial turmoil.
According to Moneyfacts data published today the average mortgage rate is currently 6.47%. To put this into context, the average mortgage rate on 14 October 2021 was 2.21%.
It’s no wonder then that homeowners are jittery. Indeed, Comparethemarket’s survey found almost 89% of homeowners were concerned their mortgage payments increasing would impact their ability to pay everyday household bills.
As many as 71% were planning to remortgage but 15% said they would not switch deals, something Comparethemarket warned could leave them ‘facing a big repayment shock’.
This is because, when their deal finishes, they will revert to their lender’s standard variable rate (SVR) which is generally the most expensive type of mortgage borrowing.
The research found 16% of homeowners were currently paying the SVR and could therefore be forking out a significant amount more each month in higher interest rates compared to a fixed-term mortgage.
Alex Hasty, director at Comparethemarket said: “We understand it is an uncertain and difficult time for many homeowners, as SVR and fixed-term rates rise, the number of mortgage products fluctuates, and the cost-of-living crisis deepens.
“Those soon coming to the end of their fixed rate deal are likely to face a big repayment shock, even if they’re remortgaging. For these homeowners, it is best practice to remortgage rather than switch onto your lender’s higher standard variable rate.
“It’s important to compare mortgage products online – checking the available deals now and staying aware of what is happening in the market will help you to prepare your budget and save for the future.”
If you are unsure how to proceed, it’s a good idea to speak to a broker or mortgage adviser who will be able to look at your individual circumstances and find a suitable mortgage to fit your needs.
