Millions of homeowners still missing out on mortgage savings of up to £5,000

Almost half of homeowners are on their provider’s Standard Variable Rate (SVR) and could make savings of up to £5,000 by switching to a new fixed rate deal, new insights from Experian reveals.

The number of mortgage holders on an SVR mortgage has increased to 46% during the UK lockdown period. This figure is up 2% from March when Experian reported 44% of homeowners had switched on to their provider’s SVR.

Moving on to an SVR can be financially damaging at the best of times as the interest rates on these mortgages are often higher than introductory offers – sometimes more than double. But now, as many households struggle with the financial aftershocks of the COVID-19 pandemic, this rise in homeowners on their providers SVR is even more worrying.

A homeowner with a £150,000 20-year mortgage loan on a typical lender’s SVR of 4.44% will have a monthly repayment of £944. The same mortgage on a typical 2-year fixed rate remortgage deal of 1.14% will have a monthly repayment of £699, representing a saving of £5,880 (£245 per month)1. Taking the arrangement fee of £999 into account, this would still leave a homeowner better off by £4,881 over the period of the offer.

While rates on fixed rate mortgages remain very competitive, with the base rate at an all-time low of 0.1%, average rates and fees have begun to increase. This could encourage more homeowners to act now and take advantage of low interest rates before they rise further.

Amir Goshtai, Managing Director of Experian Marketplace, said: “Our latest analysis of the number of homeowners on an SVR mortgage may come as a surprise, especially when many households are facing financial struggles. But, with people focused on the health of loved ones and managing life in this new environment, it’s not surprising that household finances may have slipped to the back of many people’s minds.

“We want to help people take the stress out of managing their finances and support them over the months ahead, particularly given the economic uncertainty. That’s why we’ve been proactively contacting customers we think may be coming to the end of their existing mortgage and encouraging them to compare current market offers before they get switched on to their provider’s SVR, potentially saving them thousands of pounds. Additionally, our unique mortgage savings tool makes it easy for homeowners to quickly check if they can make a saving on their monthly mortgage payments.

“We’re starting to see interest rates and fees for fixed mortgages slowly increasing as the credit market reopens. Therefore, homeowners should review their mortgage now and take advantage of competitive interest rates while they still can to lock in a lower fixed monthly payment, giving them peace of mind and certainty for the months ahead.”

Despite SVR mortgage levels remaining high, further Experian analysis found some homeowners have been taking positive action during lockdown and seeking savings on their mortgage. Remortgage enquiries through Experian were up 92% over the last four weeks compared to the first four weeks of lockdown.

Experian’s Remortgage Savings Calculator is a unique mortgage tool that informs users in minutes if they can make a saving on their current mortgage repayments. Designed to simplify the remortgage process, the savings calculator details the amount of savings a person can make and directs them to best mortgage offers on the market, matched to their needs.

Goshtai continued: “For a few years now, there has been an inertia around switching because people think it takes a lot of time to find the best offers. Yet online tools such as our eligibility services make it easy for people to compare and search credit providers so they can make savings. The market is changing as lenders regularly review their acceptance criteria and capacity to handle applications. This makes it particularly important to use a broker and eligibility services to help you find the right lender, especially for higher loan-to-value ratios”.

As well as looking for a cheaper deal with a different lender, homeowners should also contact their existing provider before renewal to see if they can get a better rate. Anyone with concerns about meeting regular mortgage payments during the coronavirus pandemic should also speak to their lender as soon as possible. If you have recently taken an agreed payment holiday and you’re about to apply for a mortgage, then you should check with the potential new lenders directly whether a payment holiday will affect your application.