Switching to a two-year fixed rate deal rather than lapsing on to the lender’s standard variable rate (SVR) is encouraged because – like many other financial products – new deals offer a more enticing price.
However, the latest analysis by mortgage broker L&C and Experian revealed just how much homeowners could save by taking the time to remortgage.
Indeed, they found a homeowner with a £150,000 20-year mortgage loan on a lender’s SVR of 4.49% will have a monthly repayment of £948.16.
The same mortgage on a two-year fixed rate remortgage deal of 0.99% will have a monthly repayment of £689.17, representing a saving of £6,215.76 (£258.99 per month).
Even taking the arrangement fee of £999 into account, this would still leave a homeowner better off by £5,216.76 over the two-year period, L&C and Experian said.
What’s more, further, data from Experian suggested almost 6% of homeowners could be coming to the end of their fixed term deal in or over the next three months so would need to remortgage.
Substantial savings
James Jones, head of consumer affairs at Experian said there were ‘substantial savings’ to be had by switching to a new fixed-rate mortgage deal and he urged anyone with a fix ending soon to check out their options.
“Taking no action will mean you lapse onto your lender’s standard rate, which will usually lead to a hike in your monthly payments.
David Hollingworth, associate director, communications at L&C Mortgages explained with living costs on the rise it was important consumers were aware they could shop around and find a better deal.
“There remain competitive deals on the market, but if expectation of an interest rate rise persists then the deals currently available might not be around for too much longer,” he said.
“Use a mortgage comparison to check whether you are on the cheapest deal, or if money can be saved by using another company’s offer.
“When thinking about the switch, remember to factor in any other costs and check if there is an early exit fee associated with your current deal. However, shopping around could help to save thousands of pounds over a short period of time.”
How to remortgage
James advised exploring your options by seeking advice from a free, independent mortgage broker. Plus, check out your credit score and make any necessary improvements as this will also impact your rate.
Independent finance broker, Norton Finance, offered the following tips to help homeowners improve their chances of getting a good deal:
- Check your credit report and, if necessary, take steps to improve
- Avoid applying for other forms of credit such as loans and credit cards
- Check your bank statement and ensure you aren’t paying out for any unnecessary goods or services. This a great time to cancel the unused gym membership or subscriptions
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Need help to find a mortgage? What Mortgage has teamed up with L&C to offer you expert advice on the right mortgage deal.
Whether you’re buying a new home, remortgaging to a new deal or buying an investment property, L&C can help – and you’ll pay no fee for their advice. To find out more, click here.
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