The charity looked at loyal customers moving to the standard rate after a two-year fixed term mortgage deal, and calculated that 1.2 million people would be better off if they switched to a new deal.

For those with bigger loans, this ‘loyalty penalty’ is even higher – one in 10 paid over £1,000 a year extra by staying on the standard variable rate.

Citizens Advice’s calculations were made by comparing the interest rates of the UK’s six largest mortgage providers to find out how much a typical standard variable rate (SVR) customer could save by switching to each provider’s cheapest fixed term deal.

Santander had the highest standard variable rate, at 4.49%, but also one of the lower two-year deals. Nationwide had the highest loyalty penalty, but that is largely because its two-year rate is just 1.59%. Lloyds had the lowest gap between its variable rate and its fixed rate, which were 3.74% and 2.39% respectively.

Citizens Advice points out there may be homeowners where a fixed rate deal is not appropriate. This might include people who have less left to pay on their mortgage, in this case the fees to take out a new mortgage may not be worth the saving.

The charity’s report also finds low awareness of the problem – with over half of people (51%) on expired fixed term mortgages wrongly thinking they pay the same or less than newer customers.

Citizens Advice chief executive, Gillian Guy, said: “More than a million loyal mortgage customers are being stung with higher interest charges when their fixed deals end.

“Buying a home is a major life decision and borrowers taking out their first mortgage often spend a great deal of time working out the best option for them. Our research shows that many who choose fixed rate mortgage deals face steep price hikes once they expire. But two thirds of borrowers say their lender has never told them they could save money by switching.

“Lenders must be more upfront and provide their customers with clear information about what could happen to the cost of their loan once the fixed term period ends.”

‘Counterintuitive that a market should punish customers for loyalty’

Ishaan Malhi, CEO and founder of online mortgage broker, Trussle, said: “It’s hugely refreshing to see a credible and trusted consumer group like Citizens Advice turning its attention to the mortgage sector, more specifically, to the millions of mortgage borrowers getting an unfair deal because they stick with one lender.

“While most mortgage borrowers understand that they need to consider switching when their initial fixed period comes to an end, so many are failing to do so. From our own research, we’ve found there are a number of causes of this inertia, which the industry could address collectively. This is why we’re also calling for industry action in the shape of a Mortgage Switch Guarantee, mirroring the consumer benefits recently implemented in the energy and current account markets.

“Looking at the report, we agree that lenders need to nudge their customers into action more often and that there needs to be greater standardisation of the way that rates are advertised so that consumers can easily compare. It seems utterly counterintuitive that a market should punish its customers for loyalty and it’s clear that something needs to change.”