An estimated 1.1 million borrowers are on their lender’s standard variable rate (SVR) – the default and pricier rate for those who haven’t locked into a fixed rate mortgage.

According to data site Moneyfacts, the average SVR now sits at 5.06%. This is up 0.15% in the month to July and is up from an average 4.40% recorded in December – ahead of the five subsequent Bank of England base rate hikes.

This is the highest rate the site has recorded since January 2009 (5.14%). And compared to this time last year, the SVR stood at 4.41%.

But it’s not just default rates which are climbing. Moneyfacts revealed the average rate for a two-year fixed mortgage in July is 3.74%, a 0.49% rise on last month and up from the 2.34% recorded in December 2021. This is the highest recorded since May 2013 when the figure stood at 3.8%.

Meanwhile, the average five-year fixed mortgage stands at 3.89%, up 0.52% in just a month and a leap from the 2.64% noted in December ahead of the first base rate hike.

This is the highest average five-year fixed rate recorded since November 2014, where the rate was 3.93%.

Both the two- and five-year rates have now seen nine consecutive monthly increases.

‘Rude awakening come winter: It’s now or never to review finances’

Eleanor Williams, finance expert at Moneyfacts, said: “Although the difference between the SVR and the average fixed rates has reduced in recent months, for eligible borrowers about to fall onto a revert rate, the incentive to lock into a new fixed deal is still clear.

“While we remain in a cost-of-living crisis, with pressure on many household budgets, it’s vital prospective borrowers explore their options and are not disheartened by recent rate rises. There are products in our top tables with even more competitive rates still available, and therefore some could possibly reduce their outgoings on their mortgage.”

She said those switching from the average SVR (5.06%) to the current average two-year fixed rate (3.74%)  might be able to make monthly savings of nearly £150 – based on a mortgage balance of £200,000 over a 25-year term.

For Lewis Shaw, founder and mortgage expert at Shaw Financial Services, one of the reasons borrowers remain on the SVR is down to apathy. But with the cost-of-living crisis starting to bite – and set to get worse – “anyone that isn’t using this time to batten down their financial hatches could be in for a rude awakening come winter”, he said.

Shaw added: “Most people would benefit from reviewing their finances and it really is now or never. The savings of moving from a 5% SVR onto a fixed rate of 3% if you had a £200,000 mortgage would be over £200 per month, which is more than £13,000 over a five-year period. That amount of saving would go a long way to ease the rising prices in the shops.

“Anyone considering remortgaging only needs to spend 10 minutes on the phone with a good-quality mortgage broker to establish potential savings and take it from there.”

David Hollingworth, associate director, communications at L&C Mortgages, said lenders have in many cases hiked their SVR off the back of the base rate rises so SVR borrowers will “already be feeling vulnerable to those changes alongside the other increases in the cost of living”.

He added that by locking into a fixed rate, borrowers can build in some protection against further base rate rises. And for those nearing the end of the fixed rate, borrowers may be able to take advantage of lender offers being valid for up to six months, so it’s worth shopping around earlier.

Hollingworth said: “Allied Irish Bank currently offers two- and five-year fixed rates at 2.95% with no arrangement fee (two-year to 90% and five-year to 85% LTV).  That would result in a mortgage payment of £707.42 and represent a saving of £169.47 over a SVR of 5%.  That would add up to over £2,030 per annum and that saving could grow if SVRs continue to climb.”

He noted the following options from mainstream lenders, but warned that rates are “coming and going quickly though and often with little or no notice”:

• HSBC currently offers a two-year fix at 3.14% to 60% LTV with a £999 fee.
• Barclays currently offers a five-year fix at 3.10% to 60% LTV with a £999 fee.

Related: See YourMoney.com’s How to remortgage for more information.