New research by consumer group Which? has found that less than half of UK homeowners know the exact mortgage rate they are paying. Over a third of those surveyed had no idea at all what rate they were on. Only 27% of people were able to recall their exact mortgage rate and 25% were found to be on SVR mortgages - a statistic which is worrying, at best.
SVR mortgages (standard variable rate) are mortgage providers' standard deals, which you are put on once the introductory period of your mortgage comes to an end. The rate varies from lender to lender and is affected by changes to the Bank of England's base rate, among other things. Most importantly, however, it is almost always significantly higher than the rate you were originally paying. The survey by Which? gave Clydesdale Bank as an example. They offer a market-leading initial rate of 1.79% during the introductory period, but then the rate jumps up to 5.2% (variable). That stands above the average SVR mortgage rate, which (according to Moneyfacts) is 5.11%.
Researchers looked at what this would mean for a person who bought a house at the average UK price (£231,422) on a 90% LTV mortgage. Paying back a £208,279 loan over a 25-year term, they could pay as much as £347 a month more once the introductory period is over and they lapse onto the SVR. This would cost them more than £4,000 extra per year!
Anyone who has come to the end of a fixed term (usually 2 or 5 years) and hasn't remortgaged is likely to be on their lender's SVR. A shocking generational disparity shows that almost twice the number of those in the 60-69 age category were on SVR mortgages (34%), compared to just 18% of 25-34 year-olds.
Our Director, Sharon Duckworth, says: "It's worth checking to see if you're on an SVR mortgage, as you could be wasting money. The market is very competitive at the moment and there are some fantastic mortgage deals for homeowners to take advantage of."
Which? found that, of those who had had their mortgage for more than 5 years, only 50% said they were happy with their deal. Alarmingly, 41% of all homeowners on SVR mortgages said that they would be "unlikely to switch if they came across a cheaper deal today". Reasons given for not switching from SVR to a better deal were that “it wasn’t worth the hassle” and “they hadn’t thought about it”. However, only 17% though that it "wasn't worth their time".
Today, other types of mortgage deals offer much lower average rates, including fixed (2.98%) and tracker (2.81%). Compared to the average SVR (5.11%), they offer exceptional value.
If you're thinking of remortgaging, it's worth speaking to a whole-of-market advisor, who will have access to all of the best available deals. Key Mortgage Advice are one such advisor, with offices in Preston, Garstang and Southport. You can arrange a free mortgage consultation with us via phone, email, or by popping in to see us. All of our contact details can be found on our Contact Us page.
