Millions of homeowners are paying over the odds for their mortgage. 4.4 million mortgage holders are currently paying their lenders expensive standard variable rate (SVR), according to research by HSBC.
These people are sitting on an average rate of 4.86%, but four out of five of them could remortgage to a lower rate, saving themselves thousands of pounds. A borrower with a £150,000 mortgage on an SVR of 4.86% could save £1,034 in interest in the first year alone if they switched to a 3.84% rate.
“In the past decade we have become a nation that obsesses over getting the best energy or insurance deal, but we have yet to focus on where the really big savings can be had,” says Will Becker CEO of TotallyMoney.com. “Ensuring you are on the best mortgage deal can save you thousands of pounds each year, it’s madness not to make sure you are getting the best possible deal.”
Most of the people currently sitting on their lender’s SVR are doing so because the fixed or discounted rate they were on has run out and they haven’t made the effort to switch – typically most of us stick with our mortgage for seven years, despite the fact most deals run out after two or three years.
A few years ago falling interest rates left SVRs quite competitive within the market, but these days there are some fantastic fixed or discounted deals available. So if your introductory rate has ended, and you won’t incur a large early repayment fee, it really makes sense to remortgage. You can find the best deals available for you with our mortgage tables.
Unfortunately, HSBC estimate that there are over 839,000 people on SVRs who cannot remortgage to a better deal as they don’t own enough equity in their home. These so-called ‘mortgage prisoners’ don’t have a high enough loan to value rate (LTV) to be able to move to a competitive deal, so are stuck on higher interest rates.
The best mortgage on the market at the moment is HSBC’s Direct Special two-year fixed rate, which has a rate of 1.99%, this is available to anyone with a 40% deposit, or 40% equity built up in their home and there is a £1,999 fee.
The next best option for anyone with less equity is Santander’s two-year tracker rate at 2.79%, to get that you will need an LTV of 70% and there is a £1,995 fee.
The best option for anyone with a really small deposit is HSBC’s 85% two-year discount special which offers a rate of 3.84% for the first two years as long as you have a 15% deposit. There is a £999 fee.
So in amongst putting up your Christmas decorations, consider whether your home is costing you thousands in unnecessary interest bills.