New Which? research has found that homeowners with standard variable rate (SVR) mortgages could be paying up to lb4,000 each year a lot more than when they switched to a different deal.
Which? surveyed over 3,500 homeowners and located that 25% had SVR mortgages, which you get transferred onto after the introductory term of your mortgage is over.
But with SVRs so much greater than the rates 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 do not know what rate they’re paying.
Just 27% of respondents knew their exact type of loan – even though 41% said they knew their approximate rate, 33% were completely in the dark.
Do you realize the eye rate on your mortgage?
How much are people paying?
The chart below shows the average rates paid through the 2,221 survey respondents who told us they knew either the exact or approximate rate of interest on their own mortgage.
What rate are you currently paying in your mortgage?
Mortgage payments with an average-priced home in London
In London, the differences are even greater. Borrowers here often see their monthly obligations increase up to lb727 when they spread for their lender's SVR.
|Average London house price
|Cheapest two-year fixed deal by initial rate
|Cheapest five-year fixed deal by initial rate
|Coventry Building Society
The price 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 a great deal larger than you'd think.
In the examples above, the differences in repayments are most critical in the Clydesdale deals. This is because Clydesdale offers market-leading initial rates nevertheless its 5.2% SVR is even higher than the 5.11% industry average, meaning that if you stuck with the lender for that full term without moving onto a brand new deal, you'd pay far more than you would with First Direct or Coventry.
Essentially, which means that should you base your choice of mortgage on initial rate, you need to be proactive about remortgaging when the fixed term ends.
Being on your ball can help you save thousands over time, and it is never too soon to plan. Actually, you can agree a brand new mortgage as early as 6 months before the