HSBC: failure to remortgage costing homeowners £4,000 a year
30th November 2015
Homeowners who have reverted to their lender’s standard variable rate (SVR) could be paying an average of £4,000 a year, or £329 a month, more than they would if they switched deals, according to new research from HSBC.
The study showed that homeowners could collectively be paying almost £29 billion more than they need to, and that individually they could make savings of almost £8,000 by signing up to a two-year fixed-rate mortgage. Switching to a competitive five-year deal, meanwhile, could lead to savings of more than £15,000 over the fixed term.
The research also highlighted the potential additional cost to homeowners should the Bank of England base rate increase by 1%. With the average SVR rate following suit, homeowners could find themselves £480 a month worse off than if they fixed now. The average SVR rate among lenders is 4.82%, whereas a two-year fixed-rate remortgage (at 90% LTV) could be more than 2% lower.
There are currently 1.9 million borrowers on an SVR who are paying a rate of above 3%. These borrowers could save as much as £329 a month, or £3,948 annually, by remortgaging.
Tracie Pearce, head of mortgages at HSBC, said: “Almost two million borrowers have an SVR mortgage rate at over 3% and could therefore benefit from moving off their SVR mortgage to a competitive fixed-term deal.
“A quick call to their lender to find out if they are on an SVR mortgage could not only be the catalyst for families to save a small fortune by switching to a more competitive mortgage, it would also provide certainty for family budgets.”
Rachel Springall, finance expert at Moneyfacts, said: “Confidence is continuing to return to the housing market, and there are many great mortgage deals available right now for borrowers to choose from.
“Homeowners who are sitting on a standard variable rate deal could well kick themselves in the long term if they don’t research the market and move to a more competitive deal before interest rates go up, and it is inevitable they will at some point.”