You are using an older browser version. Please use a supported version for the best MSN experience.

homeowners can save £4,500 per year by switching from a Standard Variable Rate mortgage

Evening Standard Homes & Property logoEvening Standard Homes & Property 05/03/2019 Joanna Whitehead
© Provided by Independent Digital News & Media Limited

Thousands of Londoners could be saving thousands of pounds a year on their mortgages – equivalent to an inflation-busting 15 per cent pay rise – according to new figures.

Failing to switch from a lender's Standard Variable Rate (SVR) once a fixed, tracker or discount mortgage deal ends means homeowners are missing out on a significant financial boost, which could go towards such day-to-day costs as childcare, paying off student debt or even taking a holiday.

UK homeowners who switch from their lender’s SVR can save an average of £4,500 each year, according to online mortgage broker Trussle.

This equates to a 15 per cent boost to the average UK pre-tax salary of £29,588.

As many as two million people in the UK are currently on their mortgage lender's SVR, having automatically been transferred to this after the fixed-term deal they initially signed up to has ended.

Failing to switch to the best true cost fixed rate deal means they are collectively missing out on £9 billion worth of savings.

How much could you save by remortgaging?

As house prices vary in different regions of the country, the average amount of money homeowners could save by switching depends on where they live.

Unsurprisingly, the highest average saving of £6,190 can be found in London, the most expensive region to buy a home, where the average house price is £474,000.

Buyers can also make substantial savings by remortgaging in the South East (£4,850) and East (£4,542).

Even in areas with much cheaper house prices buyers can save enough to splurge on a summer holiday, or pay for a decade's worth of Netflix subscriptions.

In Northern Ireland, where the average house price is £137,000, the average saving on remortgaging after an SVR is £1,871, while in the North of England it's £2,263.

“Millions of homeowners are collectively missing out on billions of pounds as a result of switching inertia," said Ishaan Malhi, CEO of Trussle.

"Breaking down the figures shows just how beneficial it can be to move away from a lender’s SVR.

"Switching mortgages is not yet clear or simple. This is a critical issue for homeowners and is costing them a huge amount of money and stress."

How to remortgage

Trussle offers a mortgage monitoring service to alert homeowners when they are about to lapse onto a lender's SVR.

Jonathan Harris, director of mortgage broker Anderson Harris, said people can often feel like they’re “mortgage prisoners”, when this doesn’t have to be the case.

He advises homeowners to contact their existing lender and say you want to switch to a new rate: “They should be able to offer you a range of options and, in most instances, you should be able to switch to a much more attractive rate.

“Alternatively, speak with a broker, who can scan the market on your behalf and find the best deals for you,” he said.

Experts advise homeowners to start exploring new mortgage deals about 15 weeks before your fixed-rate period comes to an end.

Homeowners with a poor credit history, a low credit rating, those with no proof of income or those on a low income may face challenges when trying to remortgage their home, however.

Why remortgage?

In addition to the benefits outlined above, there are other compelling reasons to consider remortgaging your property.

Because your home has increased in value

If your home has gone up in value, then you have gained equity. Owning a larger part of your home can make you eligible for more competitive deals and save you money.

More flexibility

Most lenders limit the amount you can overpay on your mortgage each year to around 10 per cent of the outstanding value. Remortgaging enables you to a pay a chunk of your mortgage off, however, without penalty.

To ‘release’ funds

Remortgaging can also provide a lump sum of cash to assist with home repairs, debt repayment or other big purchases.

If you own 50 per cent of your home, for example, applying for a 60 per cent mortgage could enable you to withdraw the remaining funds and repay these over time.

This decision would obviously increase your overall household debt over time, so think carefully about how you might repay this over the lifetime of your mortgage.

AdChoices
AdChoices

More From Evening Standard Homes & Property

image beaconimage beaconimage beacon