You are here: Home - Mortgages - Remortgage - News -

Borrowers pay £2,500 extra a year for sitting on SVRs

Written by: Antonia Di Lorenzo
Homeowners who lapse onto their lender’s Standard Variable Rate (SVR) are being stung with over £2,500 a year in extra interest, analysis has revealed.

An average homeowner slipping on to their lender’s SVR faced an extra £2,536 a year in interest payments (£211 a month), compared to the provider’s best two-year fix, according to analysis from online mortgage broker Trussle.

Across the UK there are two million borrowers currently on an SVR, who could collectively save £5bn a year by switching, the broker said.

The study looked at 16 UK lenders, and analysed the jump in interest charges from each provider’s best two-year fixed rate deal to their associated SVR.

Of the chosen lenders, there were huge differences between fixed rates and SVRs.

At Leeds Building Society the gap was £3,688.56 a year.

The smallest difference was found at Metro Bank, which charged customers an additional £164 a month, or £1,966 a year when they move onto its SVR from the best two-year deal.

One reason why a borrower may lapse onto an SVR is that they were not aware that it was time to switch until it was too late.

In Trussle’s survey of 2,000 mortgage borrowers, one in five said they could not remember the last time their provider contacted them about their mortgage.

Almost twice as many stated their lender or broker doesn’t do enough to keep them updated.

In addition, half didn’t understand terms included in letters they receive from their lender.

A quarter ignored these terms and only read the remaining parts, while 16% stopped reading completely when they reached a section they didn’t understand.

Ishaan Malhi, CEO and founder of Trussle, said homeowners are being penalised for loyalty and collectively overpaying on interest by billions of pounds every year.

“While lenders are improving the way in which they communicate with customers, more needs to be done to reduce the vast number of people on SVRs.

“As part of our call for a Mortgage Switch Guarantee, a set of proposals we hope will improve the switching process, we are asking that a mandatory letter is sent from lenders to borrowers exactly three months before the end of the initial term, which must be accompanied by electric communication to ensure it’s not missed,” he said.

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.

Unfamiliar banks woo savers with top rates…is your money safe?

If you’ve been keeping an eye on the savings best buy tables, you’ll have noticed some unfamiliar names lu...

What the base rate rise means for you

The Bank of England has raised the base rate by 0.25% to 0.5% – following on from the increase from 0.1% to ...

How to get help with your energy bills

The rise in the energy price cap from April will mean millions of households will pay hundreds of pounds a yea...

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.

Having a baby and your finances: seven top tips

We’re guessing the Duchess of Cambridge won’t be fretting about maternity pay or whether she’ll still be...

Protecting family wealth: 10 tips for cutting inheritance tax

Inheritance tax - sometimes known as 'death tax' - can cause even more heartache for bereaved families. But th...

Travel insurance: Five tips to ensure a successful claim

Ahead of your summer holiday, it’s important to make sure you have the right level of travel cover or you co...

Money Tips of the Week