Analysis of interest rates on different types of mortgages has shown that a combination of low two-year fixed-rate mortgages and a lack of movement in lenders’ standard variable rates is making switching to a new deal even more cost effective for borrowers.
According to Moneyfacts.co.uk borrowers who took out a two-year mortgage deal in July 2017 would have been paying an average rate of 2.26% on their repayments.
Meanwhile, the average standard variable rate (SVR), the rate onto which borrowers automatically fall if they don’t remortgage, is currently 4.90%.
This means any borrowers finishing a two-year fixed rate this month would face a hike of 2.64% if they do not remortgage.
Gap set to widen
What’s more this figure is only likely to increase, warns Moneyfacts.co.uk, as the record low deals that borrowers locked into in the summer of 2017 mature.
Darren Cook, finance expert at Moneyfacts, said: “The jump between the two rates is likely to increase further still in the coming months if the average SVR continues to remain fairly static, as the average two-year fixed rate in 2017 continued to fall.
“The increasing gap between the average maturing two-year fixed rates and the current average SVR will likely result in affected borrowers looking to remortgage to a better deal sooner rather than later.”
Making remortgaging easier
Mortgage experts advise borrowers reaching the end of their term should always remortgage as this will ensure they don’t pay the higher SVR and it could even result in a lower rate on repayments.
However, it is estimated millions of borrowers across the UK are overpaying by sitting on an expensive SVR because switching mortgage is not currently very clear or simple.
Online mortgage broker Trussle is currently campaigning for something called a Mortgage Switch Guarantee to help make remortgaging and switching easier.
Dilpreet Bhagrath, Mortgage Expert at Trussle, said: “When it comes to remortgaging, it’s always important to consider any personal and future circumstances, and seek advice from a broker to ensure you’re aware of the options available to you.
“To make switching easier, we’ve introduced a free mortgage monitoring service at Trussle, which alerts borrowers when a better deal comes onto the market, taking into account savings that could be made by switching.”
