Borrowers with fixed rate mortgages face big jump if they don’t review their options
Lender standard variable rates are now typically more than double the fixed rates being offered two years ago
- The average two-year fixed mortgage rate in January 2017 was 2.31%
- Average SVR which borrowers are switched to if they don’t remortgage is 4.9%
- Repayments could increase by £279 a month – or £3,352.08 a year on average
Borrowers who took out a fixed mortgage two years ago which are about to end could see the interest they pay more than double if they fail to remortgage, new analysis suggests.
The average two-year fixed mortgage rate in January 2017 was 2.31 percent, having dropped significantly due to a mortgage war between providers trying to attract customers.
But as these deals now come to an end, borrowers will automatically be reverted to their provider’s standard variable rate, which is on average 4.9per cent, according to data from Moneyfacts.
That means that borrowers with a £200,000 mortgage over 25 years on a repayment-only basis could see their repayments increase by £279 a month – or £3,352.08 a year on average if they fail to remortgage and stick to their lender’s SVR.
The current two-year fixed rate is higher than two years ago, standing at 2.53 per cent.
It comes after two interest rate rises by the Bank of England in the past year, moving up from 0.25 per cent to 0.5 per cent in November 2017 and then 0.75 per cent last summer.
Darren Cook, finance expert at Moneyfacts, said: ‘Two years ago, the mortgage market was experiencing an aggressive drop in rates, which saw the average two-year fixed mortgage rate fall from 2.56 per cent in January 2016 to 2.31 per cent in January 2017.
‘Borrowers who took advantage of this increased competition between lenders at the time could now see a difference of 2.59 per cent between their previous fixed rate and the current average SVR at 4.9 per cent.’
He added that borrowers facing such a jump in their costs are likely to be motivated to re-mortgage.
‘It clearly pays for borrowers to shop around and re-mortgage once their initial rate has come to an end’, he said.
‘However, re-mortgage customers must consider all aspects of the mortgage to ensure they are getting the best deal for them.’
Moneyfacts said its research shows that motivation to remortgage is at its highest since February 2008.
A total of 50,500 homeowners remortgaged in October – the highest number for a decade and 23 per cent higher than in the same month a year earlier, according to the last available data by UK Finance.
Article sourced from an article by Camilla Canocchi for This is Money website on 8th January 2019 . Original full article can be viewed by clicking link below
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Mc Daid Mortgages do not accept responsibility for any advice provided or opinions expressed with this article. This is for information purposes only
Your home may be repossessed if you do not keep up repayments on your mortgage
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