UK mortgage holders could save over £5,000 on their mortgage payments by switching to a new fixed rate offer, new insights from Experian reveal.
Despite the UK lockdown and new mortgage applications largely on hold, lenders still remain open for remortgages. Remortgage product rates continue to remain competitive following the recent base rate cut to 0.1%, offering homeowners opportunity to bring down monthly expenses.
According to Experian’s analysis, up to 44% of the UK’s 10.8 million mortgages are likely to be on their provider’s Standard Variable Rate (SVR),i which can be more than double the interest rate of their original introductory offer.
For example, a homeowner with a £150,000 20-year mortgage loan on a typical lender’s SVR of 4.75% will have a monthly repayment of £969. The same mortgage on a typical 2-year fixed rate remortgage deal of 1.25% will have a monthly repayment of £707, representing a saving of £6288 (£262 per month).ii Taking the arrangement fee of £999 into account, this would still leave a homeowner better off by £5289 over the period.
Yet, just one in four (24%) current or previous mortgage holders remortgaged at the end of their last introductory mortgage offer.
Of those that have lapsed on to their provider’s SVR, almost a quarter (23%) said they have not switched to a new deal because they thought remortgaging was too much hassle or too complicated, while 16% moved on to a SVR not realising that it would be more expensive.iii
The highest proportion of homeowners likely to be paying a SVR are in Northern Ireland (52%) and the North East (51%). In contrast, mortgage holders in the East of England, South East and South West regions are likely to have the lowest proportion of standard variable rate mortgages (43%). iii
Experian’s new remortgage calculator simplifies the remortgage search process and makes it easier for homeowners to find the best mortgage deals on the market.
All people need to do is enter a few details about their current mortgage before having it checked against offers from a wide panel of lenders. It will then show the amount that can be saved, calculating and listing the cheaper mortgage offers without impacting the user’s credit score. Importantly, the calculator takes into account early repayment charges so homeowners have an accurate view of their potential savings.
Amir Goshtai, Managing Director of Experian Marketplace said:
“The fact that lenders still remain open for business for remortgages presents a real opportunity for homeowners to take advantage of low rates and make a typical saving of more than £3000.
“With so many other worries and stresses at this time, we wanted to make it much simpler for homeowners to find and switch to a better deal to help them with their finances. The Remortgage Savings Calculator makes it easy for people to check if they can save money on their mortgage, without impacting their credit score.
“The market is changing rapidly as lenders review their acceptance criteria and product ranges. This makes it particularly important to plan ahead and allow extra time to complete a remortgage, especially for higher loan-to-value ratios, and to use a broker or eligibility service to help you find the right lender”.
Homeowners with concerns about meeting regular mortgage payments during the coronavirus pandemic should speak to their lenders and providers as soon as possible. Lenders are being flexible and offering support to help their customers, including payment holidays.
Experian, working with the other credit reference agencies, have agreed the introduction of a special measure, an ‘emergency payment freeze’, which will mean people’s credit scores are protected if homeowners agree with their lender to temporarily pause their payments.
Experian’s Remortgage Savings Calculator can be accessed here. As well as looking for a cheaper deal with a different lender, homeowners should also contact their existing provider before renewal to see if they can get a better rate.