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1 in 4 borrowers paying their lender’s high standard variable rate

MORTGAGES | 28.01.2021

Research by Habito has revealed that around 1 in 4 homeowners are currently paying their lender’s high standard variable rate (SVR). In fact, many borrowers think that being on the high rate actually helps them pay off their mortgage faster. They could be missing out on thousands per year by staying on the SVR.

What is a SVR?

Every lender will have their own SVR and these will generally be very similar to the Bank of England’s base rate, but it’s worth noting that they won’t always fall exactly in line with it. Most borrowers won’t be placed onto the SVR at the start of a mortgage term. Usually you’ll only start paying this rate once your introductory fixed term/discount ends. The positive aspect of the SVR can mean that you’ll end up getting a better deal after your introductory term, with cheaper repayments, especially if interest rates drop. Plus, you will usually have no early repayment charges on an SVR. Unfortunately, while you’re on the SVR, you won’t have the certainty of knowing how much your mortgage payment will be each month. You might also not benefit from an interest rate drop as the lender can set their own rate. 

A worrying lack of awareness

The research by Habito highlighted that about twenty seven percent of people were on a SVR, and 1 in 5 homeowners didn’t actually know whether they were on their lender’s SVR or not. There seems to be a growing trend amongst some borrowers as to the awareness of remortgaging and the reasons why people do it. In fact, many borrowers believe that they could pay off their mortgage quicker simply because their monthly payments were higher, not taking into account the SVR. However, this isn’t the case, as any extra money would actually be paying off the interest, as opposed to paying off the mortgage balance. 

Confusion about remortgaging

The Bank of England’s most recent data showed that remortgaging decreased by 33% between February and November last year. A worrying trend that seems to partly have come about due to misconceptions about remortgaging.  Some borrowers believe that remortgaging involves taking on more debt, or that it’s just something borrowers do because of financial struggles. Research also revealed that some homeowners don’t actually know what remortgaging is, or believe that it involves taking out a second mortgage. 

What’s the point of remortgaging?

Remortgaging is primarily an option to save yourself money. It’s all too easy to settle into just paying your monthly mortgage payments without really thinking about whether or not you’re paying over the odds. This can be a mistake considering for the vast majority of people, the mortgage is their biggest financial commitment.  Looking to see if you can get a better deal could result in you saving a significant amount each month, and work out to huge annual savings overall. Once your introductory deal is coming to an end, you should take the opportunity to look into remortgaging to ensure you’re getting the very best deal for you. You can either approach your current lender, as they’ll want to keep your business, or look at switching to another. Keep in mind that your current lender may charge an exit fee if you decide to switch, as well as an early repayment charge. Remortgaging can also help you to raise additional capital too

We are remortgage specialists

We have years of experience when it comes to helping homeowners find the best deal on their remortgage. Our team can do the leg work for you, searching the relevant markets and sourcing the most suitable remortgage deal for your specific needs.  For more information on remortgage your home, please get in touch with our team today on 0345 305 2540, or at info@taylormade-finance.co.uk.
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