Mortgage holders are being urged to check if they can reduce their bills. It’s estimated that as many as 600,000 households are currently on a Standard Variable Rate (SRV) mortgage deal, which is adding thousands to their payments.
With interest rates fluctuating and the average SVR sitting at a high 7.25 percent, homeowners paying these rates may be overpaying by thousands each year.
In comparison, the average two-year fixed rate among the major lenders is 4.52 percent, according to new data from mortgage broker Mojo Mortgages.
For an average UK property worth £267,100, the difference between these rates equates to a monthly saving of £332 or a staggering £3,984 per year.
Over two years, this works out to more than £4,600 in potential savings.
Standard Variable Rates (SVRs) are often much higher than fixed-rate deals because they fluctuate with the lender’s discretion or changes in the Bank of England’s base rate, resulting in higher and less predictable payments.
Mojo Mortgages said: “With interest rates fluctuating unpredictably, now is an ideal moment for these homeowners to reassess their mortgage options and seize the opportunity to save thousands.
“If you’re unsure what interest rate you’re on, you should review your mortgage statement. This will typically include your current interest rate. Look for sections labelled ‘interest rate’ or ‘current terms’.
“If your statement doesn’t provide this confirmation, reach out to your mortgage lender directly.”
The mortgage expert noted that opting for a fixed rate can bring a range of benefits, such as predictable monthly payments and protection from Base Rate rises.
However, there are a few considerations people must make before taking the leap. First, people should check if their current mortgage comes with an Early Repayment Charge (ERC).
Those who exit their current mortgage early may face ERCs, which can range from 1% to 5% of their outstanding balance. Calculate whether the savings from switching outweigh these costs.
Arrangement fees should also come into consideration. Some lenders charge this for new mortgages, which can cost up to £2,000. Consider whether a fee-free deal might be available.
Additionally, Mojo Mortgages urges people to assess if fixing a mortgage ties in with their future plans. It said: “If you anticipate moving within the next few years, a shorter fixed term – like a two-year fix – might be more suitable, offering flexibility without the long-term commitment.
“Also, think about potential life changes such as starting a family, changing careers, or retiring, which could affect your housing needs and financial situation.”
The mortgage experts urged people struggling to speak with a mortgage broker, who can provide “personalised advice” tailored to people’s financial situations.
