Homeowners encouraged to take action and save almost £5,000 by remortgaging

Latest figures from Experian & L&C Mortgages have been issued ahead of the Bank of England rate setting meet:

  • According to new analysis by Experian and L&C Mortgages, borrowers could save nearly £5,000 on their mortgage payments by switching to a new fixed rate two-year offer.
  • For example, a homeowner with a £150,000 20-year mortgage loan on a lender’s standard variable rate (SVR) of 4.49% will have a monthly repayment of £948.16. The same mortgage on a two-year fixed rate remortgage deal of 1.34% will have a monthly repayment of £712.83, representing a saving of £5,647.92 over two years (£235.33 per month).
  • Taking the arrangement fee of £999 into account, this would still leave a homeowner better off by £4,648.92 over the two-year period.
  • Experian is encouraging consumers to consider switching, as the Bank of England meets again to decide interest rates this Thursday, 3rd February. Following the last rate rise of 0.15%, today’s analysis shows that the amount a consumer could have saved by remortgaging in December has since been reduced by £370 over 24 months – suggesting consumers should take control of their finances.
  • Further, data from Experian suggests that almost 5.5% of homeowners could be coming to the end of their fixed term deal in or over the next three months. They will lapse onto their lender’s SVR unless they remortgage.

James Jones, Head of Consumer Affairs at Experian said: “The cost of living continues to increase, with many consumers feeling a squeeze on their finances. By exploring remortgage options now, homeowners could secure substantial savings by switching to a new fixed-rate mortgage deal, to help offset the effects of inflation.

“Taking no action will mean you lapse onto your lender’s standard rate, which will usually lead to a hike in your monthly payments. Many economists are predicting that the Bank of England will raise interest rates again. As mortgage repayments could also increase, it’s worthwhile exploring your options now and get a new rate locked in.

“You can get help with this by seeking advice from a fee-free mortgage broker. It’s also worth taking a moment to review your credit score and, where possible, make improvements ahead of any formal credit check.”

David Hollingworth, Associate Director, Communications at L&C Mortgages adds: “High inflation is pushing up costs for households and resulting in the increased likelihood of higher interest rates. Mortgage rates have already nudged up since last year but remain very competitive and shopping around could give homeowners the chance to slash their outgoings and protect against further rate rises. Lenders have typically been passing on the last base rate rise to those on standard variable rates, which remain much higher than the best deals on the market.

“Use a mortgage comparison site to check whether you are on the cheapest deal, or if money can be saved by using another company’s offer. When thinking about the switch remember to factor in any other costs and check if there is an early exit fee associated with your current deal. However, shopping around could help to save thousands of pounds over a short period of time.”