Could you save on your mortgage by moving from the SVR?
It is a good question because it rarely makes financial sense to pay a Standard Variable Rate instead of signing up for a new mortgage. After all, the extra money could be in your pocket rather than the one belonging to the bank or building society. There are also thousands of products available, so there is potential that you will be able to get a far lower mortgage interest rate than the SVR.
An SVR is an interest rate set by your lender. Mortgage customers are moved onto a default interest rate when their initial fixed-rate mortgage ends. For example, if you are paying the SVR set by your lender, your payments can go up and down according to changes in interest rates. In addition, mortgage lenders can increase or decrease their SVR anytime, not just after base rate changes.
We find that some homeowners are on this rate because they think a lender won’t offer them a new deal, but this may not be true. Or, because they do not have the time to review the rates themselves, why not use a broker to do the hard work for you? At LIFT-Mortgages, we can compare rates across the whole market with access to many lenders and preferential rates.
According to The Guardian, banking industry figures show that at the end of 2021, just over 1 million borrowers were paying their lender’s SVR. As a result, each 0.25 percentage-point increase will add around £16 a month to their repayments.
You could potentially be saving a significant amount each year by switching from an SVR to a fixed rate. However, rates are increasing and the gap has widened in recent years, with some of the SVRs now standing at five times more than the lowest advertised fixed rates.
An example would be a homeowner paying a £500k mortgage over 30 years, with an SVR of 5.24%; this would be £2,729 a month. With the new fixed rate of 3.38%, the homeowner would be paying £2,216 a month, saving £513 a month (1.86%).
At LIFT-Mortgages, we’re a whole market, an independent broker with a friendly team of experts committed to getting you the best deal. We have access to a wide range of lenders and special rates, which are only available to brokers, not directly to clients by going direct.
If you’d like to chat with someone from our friendly team, contact us via email at email@example.com. There could be better options for you…
This blog does not constitute as financial advice.
Past performance is not a reliable indicator of future performance.