Millions miss out on mortgage savings by staying on SVRs

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Millions miss out on mortgage savings by staying on SVRs

Four million UK households are losing money by languishing on standard variable rates (SVR) when they could be getting a better deal.

More than a third (36 per cent) of homeowners are still on an SVR mortgage when they no longer need to be, missing out on savings of more than £2,500 a year, according to analysis by London and Country (L&C) Mortgages.

More than half (58 per cent) of UK households have never remortgaged to save money - and with the possibility of a rise in interest rates on the horizon, these people could face even higher payments due to a corresponding increase in SVRs.

A further 1.1m households are wasting £2.78bn by sitting on the wrong mortgage deal, while 3.4m households do not even know the current interest rate of their mortgage.

Regional analysis shows households in London are overpaying the most (£266 a month), with those in the north of England spending £201 more than they need to be.

RegionAverage Monthly SavingAverage Annual Saving
Midlands £222£2,659 
North of England £201£2,406 
South of England £222£2,669  
London£266£3,193 
Grand Total£216 £2,590 

L&C’s associate director of communications David Hollingworth said: “With the cost of living on the rise and day-to-day expenses like energy prices soaring, it is hugely concerning to see that people are paying so much more than they should be.  

“On top of this, our research shows that while homeowners believe they are paying too much for their mortgage they still aren’t taking action to cut their monthly payments.

“A mortgage is likely to be someone’s biggest monthly outgoing, and in only a few easy steps they could get a better deal. It’s crucial that homeowners regularly review their mortgage, to see how their rate stacks up against the record low rates that alternative deals currently offer.”

L&C analysed both external research and internal data relating to the type of mortgage deals homeowners are on, their outstanding loan size and the remaining term, before identifying a potentially better rate to calculate the savings they could make on their monthly mortgage payments.

Lea Karasavvas, managing director at London-based Prolific Mortgage Finance, said: “Many clients are still on lenders' standard variable rates, but it should be remembered that a certain percentage of these people are ‘mortgage prisoners’ who are unable to move away due to client circumstance such as age, credit profile or even the fact that their current lender stopped lending.

“That said, there are also a huge amount that have simply not reviewed their current mortgage and have let the rate roll on to their variable rate without knowing or caring. 

“As mortgage brokers, our role is to ensure that our clients are never in this position, so we (as do most lenders now) will get in touch with our clients and outline what their options are. 

“The majority of lenders such as Santander, Halifax and Barclays, who are the big three, offer exceptional retention rates to retain clients and keep their business. 

“If borrowers are on standard variable rates, I would suggest as a minimum they should be contacting their lender to see what alternative rates are available to them."

simon.allin@ft.com