Sitting Uncomfortably on Your SVR Mortgate Interest Rate?

By: MoneyFacts

Back in 2013 the Funding for Lending Scheme had a major impact on the mortgage market, leading to the introduction of what were at the time the lowest rates we had ever seen, particularly for two-year fixed deals. However, consumers who snapped up these deals are now coming to the end of their fixed terms, which means that many will soon start paying their providers’ revert rate. But data from Moneyfacts.co.uk shows that by sitting on the revert rate, borrowers could potentially see their repayment costs shoot up by almost £3,500 a year.

Moneyfacts.co.uk shows that by sitting on the revert rate, borrowers could potentially see their repayment costs shoot up by almost £3,500 a year.

Charlotte Nelson, Finance Expert at Moneyfacts.co.uk, said: 

“Borrowers may be shocked by the jump in cost of their monthly repayments when their fixed rate deal ends, particularly if they took advantage of one of the plethora of low rates available in 2013. The difference between the initial rate on the deal and the revert rate can be quite dramatic; for example, borrowers who opted for West Brom Building Society’s two-year deal in 2013 might have found that the cost of their repayments has now increased by an extra £256.58* a month.

“With the average Standard Variable Rate (SVR) standing at 4.82% today, it’s easy to see why repayments at the end of a fixed deal increase by so much. However, borrowers don’t have to put up with these high costs; mortgage rates are still resting at record lows, which means there has never been a better time to remortgage to a new fixed rate. Not only will borrowers secure themselves a cheaper deal, but they will also buffer themselves from any base rate rises within the deal.

“Borrowers remortgaging today may be concerned by how much the mortgage process has changed due to the introduction of the Mortgage Market Review in the intervening period. However, as long as remortgagors get their finances in order, there’s nothing to worry about.

“If you are considering remortgaging to a low cost deal, act now to avoid disappointment, and remember to note the end date of your mortgage offer. This way, you can evaluate the market ahead of time and ensure you do not find yourself sitting uncomfortably on a high SVR in the future.”

*Repayments based on a £200,000 mortgage over a 25-year term on a repayment basis only – excludes fees.

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