Whilst interest rates being at a historical low may not be great news for savers, those with average loan to value mortgages could save themselves thousands of pounds a year by switching to a new fixed rate product.
According to This is Money, homeowners with a £150,000 mortgage could save £2,316 a year whilst those borrowing more than £250,000 could be looking at savings of £3,816 – handsome sums in what can only be described as an unsettled and difficult economic climate.
With four in ten borrowers having fallen onto their lender’s Standard Variable Rate (SVR) once their fixed term ended, the all-time low rate of 0.5% set by the Bank of England back in 2009 meant that many experienced a significant drop in their monthly repayments. However recent falls in fixed rates has reversed the situation for many, meaning that they could start to save money now by remortgaging, even before interest rates start to rise.
Recent market turmoil has been attributed to the drop in rates, with a gloomier outlook for the Eurozone combined with downbeat comments from Bank officials suggesting that the Bank of England may push back the point at which interest rates begin to increase.
According to HSBC, the current average SVR is sat at 4.99% and, for a large proportion of the population sat on a minimum of 15 percent equity, new deals could see them paying just 2.63%. Furthermore, those sitting on standard variable rates will most likely have ridden out the period where lenders charged an exit penalty for changing mortgages, meaning that there is nothing to lose by shopping around and moving to a better deal if you can find one.
Homeowners with more equity are inevitably in the best position to bargain for better rates. Nonetheless those sitting on high loan to values shouldn’t despair – industry figures show that rates for those on 90 percent mortgages have sunk from 4.5% in June to 3.99% now; also an all-time low.
Borrowers looking to move, however, need to watch out for arrangement fees on the lowest rate deals but the good news is that there are some fee-free or low fee options out there and figures from the Council of Mortgage Lenders show that almost 90 percent of new mortgages being taken out are fixed rates.
With average annual house prices increasing by 11.7 percent, as recorded by the ONS, there is hope out there for all homeowners, even those who purchased with a low deposit, as it’s likely their equity will have increased during their initial fixed rate deals.
If you would like to find out if you can save money by switching your mortgage*, please contact your Finura Adviser on 020 3713 3352 or email firstname.lastname@example.org.
*We introduce mortgage referrals to our mortgage partner, Savills Private Finance (SPF). Your home may be repossessed if you do not keep up repayments on your mortgage.
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