Half a million homeowners are on ‘rip-off’ mortgage rates of up to 9.24 per cent due to easy mistake. Borrowers who fail to take out a new mortgage in time before the term ends are automatically shifted on to their lender’s Standard Variable Rate (SVR) where costs can top 9.24%.
The average two-year fixed rate is currently 5.66 per cent, according to data site Moneyfacts.co.uk, while the average five-year fix is 5.3 per cent. In comparison the average SVR is a whopping 8.16 per cent, the Sun newspaper has reported.
For a £200,000 mortgage it means you’d be paying a monthly repayment of £1,247 on a typical two-year fix or £1,204 on the five-year equivalent. On the typical SVR you’d be paying £1,556 – £352 more than the five-year average.
Martin Stewart, broker at London Money, said: “The greatest gift to any lender is client apathy. There are hundreds of thousands of clients currently sat on high variable rates, even with the bank base rate cut in August, most lender SVRs are likely to be over 8%.
“Alongside apathy, there is also ignorance and many borrowers may not realise that their lender will allow them to switch effortlessly to a new rate at the flick of a switch.” Chris Sykes, technical director at broker Private Finance, said: “There are very, very few scenarios where I would ever recommend a borrower be on an SVR.
“The vast majority of lenders allow you to product transfer from one rate to another without any further affordability checks.” Mr Sykes went on: “The only real situation, i’d recommend a client be on an SVR is where they’re looking to sell the property in the very near future.
“If they’re looking to sell it in the longer term, it’s probably better to go on to a tracker rate with no early redemption fees.”
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