With interest rates having remained at an all-time low for the past decade, homeowners could be forgiven for not actively seeking to review their current mortgage provision. However, following a second interest rate rise in August 2018 – the previous being in November 2017 – many homeowners on standard variable rate and tracker mortgages will have seen their monthly payments go up.
According to an article on moneysavingexpert.com, if you’re on your lender’s standard variable rate, there is a good chance you will be overpaying. The average SVR is 4.24%, yet the top two-year fixed mortgage right now is just 1.35%* – the difference in cost is over £2,500 per year on a typical £150,000 repayment mortgage with 25 years remaining. It highlighted that, even with the switching fees, homeowners could still make worthwhile savings.
This is supported by figures released by the Nationwide Building Society, which showed that on the average standard variable rate mortgage of £125,000, an increase of 0.25% would increase monthly payments by £15 to £665. That would amount to an extra £185 per year.
For those who have not addressed their mortgage for some time due to the stability in interest rates, it could be a good time to review what the market has to offer. In addition, the Bank of England has also announced that they will be sticking to previous guidance that there will be further interest rate rises although, Mr Carney, the Bank’s governor, told the BBC that these will be “limited and gradual”.
Below is a table that demonstrates how subsequent rises could affect mortgage payments.
Source: Halifax Base: Repayment mortgage for £150,000 loan
With substantial differences between lenders and a plethora of products available on the market, it is crucial clients get the right advice and details of which lender to approach first time.
If you would like to review your current mortgage provision or discuss a new application, please contact your Finura Partners advisor.
*Please note these particular deals might not be available to every client and will depend upon your individual circumstances.
Your home may be repossessed if you do not keep up repayments on your mortgage.
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