New Which? research has found that homeowners with standard variable rate (SVR) mortgages could be paying up to £4,000 per year more than if they switched to a new deal.
Which? surveyed over 3,500 homeowners and found that 25% had SVR mortgages, which you get transferred on to after the introductory term of your mortgage is over.
But with SVRs so much higher than the rates available on fixed, discount and tracker mortgages, these households could save substantial amounts by remortgaging.
Homeowners don’t know their mortgage rate
Our survey also found that a substantial amount of homeowners have no idea what rate they’re paying.
Just 27% of respondents knew their exact mortgage rate – and while 41% said they knew their approximate rate, 33% were completely in the dark.
Do you know the interest rate on your mortgage?
How much are people paying?
The chart below shows the average rates paid by the 2,221 survey respondents who told us they knew either the exact or approximate rate of interest on their mortgage.
What rate are you paying on your mortgage?
Mortgage payments on an average-priced home in London
In London, the differences are even greater. Borrowers here could see their monthly payments increase by as much as £727 when they pass on to their lender's SVR.
|Average London house price||Deposit||Mortgage amount|
|Cheapest two-year fixed deal by initial rate||Initial rate||SVR||APRC||Fees|
|Cheapest five-year fixed deal by initial rate||Initial rate||SVR||APRC||Fees|
|Coventry Building Society||2.35%||4.74%||3.8%||£999|
The cost of remaining on an SVR in London
What do these figures tell us?
This data shows that the gap between initial rates and SVRs might be even bigger than you'd think.
In the examples above, the differences in repayments are most significant in the Clydesdale deals. This is because Clydesdale offers market-leading initial rates but its 5.2% SVR is even higher than the 5.11% industry average, meaning that if you stuck with the lender for the full term without moving onto a new deal, you'd pay far more than you would with First Direct or Coventry.
Essentially, this means that if you base your choice of mortgage on initial rate, you need to be proactive about remortgaging when the fixed term ends.
Being on the ball can save you thousands in the long run, and it's never too early to plan. In fact, it's possible to agree a new mortgage as early as six months before the