Hang fire remortgagingStandard rates can offer best rate for borrowers

14 January 2009

New research suggests remortgaging may not be the best option for millions who are coming to the end of current mortgage deals.

At the moment, only 8% of existing borrowers are on (SVRs) and they’re mainly older borrowers with mortgages too small to make it worthwhile remortgaging.

But if fixed rate deals don’t fall, staying with your existing lender on its SVR may prove to be the best ploy.

Best rates

SVRs are at their lowest for many years, which means it could be cheaper to simply revert to this instead of negotiating a new fixed rate for example. 

Analysis done by Citywire has found lenders have, in many cases, passed on the latest 0.5% point cut in the bank base rate to 1.5% in full – but only on their SVRs and some existing tracker mortgages.

According to the Council of Mortgage Lenders, the average mortgage rate over the last 10 years has been 5.84% so, currently, SVRs are historically cheap and the fact that some of them are now as low as 3.5% (Cheltenham & Gloucester) and 3.69% (First Direct) means, unusually, they are often the best mortgage rates.

Existing customers

The drawback though seems to be that many lenders are only allowing existing customers to take up these deals so you may not be able to switch, though it is worth checking.

For example, the largest mortgage lender Halifax is dropping its SVR by 0.25% to 4.5% from 1 February, although all its tracker customers will benefit from the full 0.5% reduction.

Unattractive fixes

In addition, fixed-rate deals do not look very attractive at the moment, for example, Alliance & Leicester has a 26-month fix at 3.49% if you have a deposit of 40% of your property's value but, beware, as you pay for that with a 2% arrangement fee - £2,000 on a £100,000 mortgage.

Royal Bank of Scotland and NatWest, now majority owned by the government, are lowering their SVRs by just 0.25% to 4.19%, although those on a tracker deal will benefit from the full 0.5% cut.

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