
"Nobody wants to pay more than they need to when it comes to the monthly cost of their mortgage, but that’s exactly what could happen if you allow your mortgage to drift onto a standard variable rate"
- Stephanie Daley - Alexander Hall
Homeowners who let their fixed-rate mortgage expire without securing a new deal could see their monthly repayments rise by hundreds of pounds, according to new analysis by mortgage adviser Alexander Hall.
The firm compared the financial impact for borrowers coming to the end of a two-year fixed mortgage, using average market rates and borrowing levels.
Two years ago, a typical homebuyer would have taken out a loan of £217,502 with a 15% deposit on an average house costing £255,885. At that time, the average two-year fixed rate at 85% loan-to-value was 4.98%, leading to monthly repayments of around £1,269.
Today, that borrower would have a remaining loan of £208,277. If they locked in a new two-year fixed rate at the current average of 4.74%, they could expect monthly repayments of £1,241. That’s a modest saving of £28.33 a month or £679.92 over the next two years.
But borrowers who fail to act and instead move onto their lender’s standard variable rate could see repayments surge.
At the current average SVR of 7.23%, monthly payments on the same remaining loan would rise to £1,550. That’s £281.29 more each month than under their previous fixed term, or an extra £6,750.96 over two years.
“Nobody wants to pay more than they need to when it comes to the monthly cost of their mortgage, but that’s exactly what could happen if you allow your mortgage to drift onto a standard variable rate,” said Stephanie Daley, Director of Partnerships at Alexander Hall.
“That’s why proactivity is key when it comes to renegotiating your terms. Although your current lender may offer you a product transfer offer, this is unlikely to be the most competitive option and doesn’t allow you to make other changes, such as altering the overall term or loan amount.
“This is where mortgage advisers come into their own, as they are able to compare products from lenders across the market to ensure you are getting the very best deal for your individual circumstances.”