Act now if your two-year fixed mortgage deal is about to end
Borrowers on maturing two-year fixed mortgages could see their interest rate double if they fail to remortgage, figures reveal.
Borrowers are automatically moved onto their lender’s standard variable rate (SVR) once their deal has come to an end.
But the gap between the average maturing two-year fixed rate mortgage and the average SVR is at its highest level since February 2008, according to Moneyfacts data.
In January 2017, the average two-year fixed rate deal was 2.31%. The average SVR has now risen to 4.90%, an increase of 2.59% and the biggest gap in a decade.
Moneyfacts spokesman Darren Cook, said: “Two years ago, the mortgage market was experiencing an aggressive drop in rates, which saw the average two-year fixed mortgage rate fall from 2.56% in January 2016 to 2.31% in January 2017.
“Borrowers may be shocked to find that their monthly repayments could increase by £279.34 a month or £3,352.08 a year on average if they settle for their provider’s SVR.
“This is likely to motivate many customers to remortgage, despite the current increase in the average two-year fixed rate rising to 2.53%, as this is still 2.37% below the current average SVR. It could decrease the monthly repayments of those sitting on their lender’s SVR by £257.30 or £3,087.60 on average.”
He added: “Faced with such a big jump in monthly repayments, it clearly pays for borrowers to shop around and remortgage once their initial rate has come to an end. However, remortgage customers must consider all aspects of the mortgage to ensure they are getting the best deal for them.”
The gap between the average maturing rate and average SVR has been steadily growing since January 2018, when it stood at 2.19%.
With intense competition in the mortgage market large numbers of homeowners remortaged in 2018.
However, the latest figures released by UK Finance earlier this month, revealed a drop in remortgage approvals by high street banks of 20.3% in November 2018 from the same month in 2017.