You are here: Home - Mortgages - First Time Buyer - News -

Big mortgage lenders’ default rates cheaper than average two-year fix

Written by:
Homeowners coming to the end of their current mortgage deal could find their lender's standard rate is cheaper than the average two-year fix, research suggests.

A total of 600,000 fixed rate deals are due to expire in H2 2022, while 1.8 million are set to expire over the course of 2023.

As interest rates rocket, those coming to the end of their current deal will see their monthly mortgage payments spike.

Traditionally, fixed rate mortgage deals are cheaper than a lender’s standard variable rate (SVR).

But research from comparison site Comparethemarket and its partner L&C Mortgages, found the average SVR of the top five banks (Barclays, Lloyds Banking Group including Halifax, Nationwide Building Society, NatWest and Santander) was 5.44% as of 7 October, which is lower than the average two-year fixed mortgage rate of 6%.

It also found that around 55% of homeowners will see the fixed rate period of their mortgage end in three years, putting them at risk of a payment shock if they refinance onto higher rates.

A poll of 2,023 mortgage holders found 89% of homeowners whose deal will end soon were worried about rising rates pushing up their mortgage payments. Additionally, nine in 10 had concerns this would impact their ability to pay household bills.

The survey found that 71% of respondents will remortgage when their fixed term ends. However, 15% do not plan to, meaning they will move on to their lender’s SVR.

Meanwhile, a quarter of those surveyed were not on a fixed rate mortgage deal and of those, 16% are already on an SVR.

Big repayment shock

Alex Hasty, director at Comparethemarket, said: “We understand it is an uncertain and difficult time for many homeowners, as SVR and fixed term rates rise, the number of mortgage products fluctuates, and the cost-of-living crisis deepens. Those soon coming to the end of their fixed rate deal are likely to face a big repayment shock, even if they’re remortgaging. 

“For these homeowners, it is best practice to remortgage rather than switch onto your lender’s higher SVR. It’s important to compare mortgage products online – checking the available deals now and staying aware of what is happening in the market will help you to prepare your budget and save for the future.”

There are 0 Comment(s)

If you wish to comment without signing in, click your cursor in the top box and tick the 'Sign in as a guest' box at the bottom.

Big flu jab price hikes this winter: Where’s cheapest if you can’t get a free vaccine?

Pharmacies, supermarkets and health retailers are starting to offer flu jabs ahead of the winter season, but t...

Is now the time to fix your energy deal?

Fixed energy tariffs all but disappeared during the energy crisis. But now they are back with an increasing nu...

Everything you need to know about the pension triple lock

Retirees are braced to receive another bumper state pension pay rise next year due to the triple lock mechanis...

What will happen if rates change

How your finances will be impacted by a rise in interest rates.

Regular Savings Calculator

Small regular contributions can build up nicely over time.

Online Savings Calculator

Work out how your online savings can build over time.

The best student bank accounts in 2023: Cash offers, tastecards and 0% overdrafts

A number of banks are luring in new student customers with cold hard cash this year – while others are compe...

DIY investors: 10 common mistakes to avoid

For those without the help and experience of an adviser, here are 10 common DIY investor mistakes to avoid.

Mortgage down-valuations: Tips to avoid pulling out of a house sale

Down-valuations are on the rise. So, what does it mean for home buyers, and what can you do?

Money Tips of the Week