SVR huggers miss out on cheaper mortgage payments

| July 12, 2010

New research from Yorkshire Building Society shows that the number of mortgage borrowers now on their lenders’ standard variable rates (SVRs) is over 2.3 million, representing 28% of the total mortgage market.

Typically these households have come off fixed-term deals and for one reason or another have chosen to revert to their lenders’ SVRs, rather than remortgage.

However, the building society points out that the average SRV currently stands at 5.04%, well above the best buy deals and not least, Yorkshire’s 3.49% two-year variable rate tracker.

There is a snag in that the most competitive deals are only available to borrowers who need loan-to-value ratios of less than 85%, meaning that homeowners with only a small amount of equity in their properties are unlikely to find a remortgage rate that outdoes their lender’s SVR.

But according to the research, 75% of SVR mortgage holders (1.7 million) are free to move and could collectively save up to £1.8 billion a year in interest payments.

Furthermore, for every 1% rise in UK house prices, approximately 16,000 mortgage payers move below 85% LTV, into mortgage freedom.

The Yorkshire’s website offers a mortgage check calculator that shows how much can be saved by making a switch, and the building society claims that eight out of ten users have found they can reduce their monthly mortgage payments.

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