The difference between the main high street mortgage lenders’ standard variable rate (SVR) and their fixed rate deals could be costing borrowers, an expert has warned.
The average offer for an SVR is 8.24% and the average two-year fix is 4.68% among the six biggest lenders in the UK: Lloyds, HSBC, NatWest, Nationwide, Santander and Barclays, according to Mojo Mortgages.
On a 75% loan to value (LTV) and a 25-year loan term, Mortgage Solutions reported the average payment per month is £1,581 for an SVR at 8.24%, while among the ‘big six’ lenders, a 4.48% average rate for a two-year fix comes to £1,136 – a £445 difference.
Mortgage rates are expected to fall after the Monetary Policy Committee (MPC) voted to reduce the Bank of England base rate from 4.75% to 4.5% last week
Laura Suter, director of personal finance at AJ Bell, said: « Many homeowners will be baffled that despite multiple interest rate cuts, average mortgage rates are higher than they were a year ago. Even ahead of [the] base rate cut, which looked like a dead cert, mortgage rates headed in the opposite direction.
« Two-year fixed rates are now higher than they were in November last year and only a smidge lower than February last year – despite two base rate cuts since then – while five-year rates are higher than two years ago. »
Switching mortgages from a SVR to fixed rate means monthly payments are predictable and the chance to pay more of the principal balance of your loan as opposed to interest charges.
