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

Homeowners on standard variable rates overpaying by £4,000 a year

0
Written by:
18/11/2015
Homeowners with a standard variable rate (SVR) mortgage could be shelling out £4,000 a year – or £329 a month – more than necessary by failing to fix their rate, according to HSBC research.

The findings indicate homeowners could collectively be paying almost £29bn more than they need. This equates to individual savings of almost £8,000 for borrowers who sign up to a two year fixed rate mortgage.

The report also highlighted the potential additional cost to homeowners should the Bank of England increase the base rate by one per cent. If mortgagors fixed their rate following an increase, they could be £480 a month worse off than fixing now, it said.

The average SVR rate among lenders is 4.82%, whereas a two year fixed rate remortgage can be over 2% lower, including HSBC’s at 2.38%. There are currently 1.9 million borrowers on an SVR who are paying a rate above 3%, and would therefore benefit by switching from an SVR.

These borrowers could save as much as £329 per month (£3,948 annually) by remortgaging, or £15,000 over a 5-year fixed deal. As a whole, homeowners could be paying almost £30bn more than they need.

By moving to a market leading fixed term deal, a borrower could save enough in the first month to cover five weeks of food shopping (an average £58.80 per week) with cash left to spare, fund a one week holiday for four in Lanzarote (£3,132) with the first year’s savings, or save enough over the course of a two-year fixed term to buy a new Peugeot 108 (£7,545).

SVR rates could rise at any time. Borrowers moving to a fixed rate product would be shielded from rising rates during the fixed term.

If the average SVR rate were to rise by one percentage point to 5.82%, monthly payments would increase by £151 a month to £1,608, according to HSBC. Borrowers who moved to a two-year fixed rate would pay £480 less a month (£5,760 annually).

Tracie Pearce, head of mortgages at HSBC said: Almost two million borrowers have a SVR mortgage rate at over 3 per cent and could therefore benefit from moving off their SVR mortgage to a competitive fixed term deal. A quick call to their lender to find out if they are on a SVR mortgage could not only be the catalyst for families to save a small fortune by switching to a more competitive mortgage, it would also provide certainty for family budgets.”

Rachel Springall, finance expert at Moneyfacts, said: “Confidence is continuing to return to the housing market, and there are many great mortgage deals available right now for borrowers to choose from. Homeowners sitting on a standard variable rate deal could well kick themselves in the long-term if they don’t research the market and move to a more competitive deal before interest rates go up, and it is inevitable they will at some point.”

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.

The savings accounts paying the most interest

If one of your jobs this month is to get your finances in order, moving your savings to a higher paying deal i...

Coronavirus and your finances: what help can you get?

News and updates on everything to do with coronavirus and your personal finances.

Everything you need to know about being furloughed

If you’ve been ‘furloughed’ by your company, here’s what it means…

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

Read previous post:
TUC
Gender savings gap emerges as Brits hit their 30s

Women are in danger of losing out in retirement as the amount they save compared to men drops when they...

Close