Moneyfacts reports that due to the difference between a fixed rate two years ago and today’s SVR, the motivation to remortgage is at an 11-year high.
Data provided by the firm shows that borrowers who took out a two-year fixed rate mortgage in 2017 are likely to move onto an SVR of more than double the initial rate.
The average two-year fix came in at 2.31 per cent in January 2017, while the average SVR today clocks in at 4.90 per cent – a gap of 2.59 per cent.
Reverting to an SVR, says Moneyfacts, could lead to borrowers seeing a monthly increase in their mortgage bill of nearly £280 (based on a 25-year term £200,000 mortgage), or £3,352 a year.
Remortgaging at today’s average two-year rate of 2.53 per cent, the company concludes, would decrease payments by nearly £260 a month, or just over £3,000 a year.
Moneyfacts financial expert Darren Cook says: “This increased motivation to switch deals is clearly driving some to switch providers, which could see some lenders lose a substantial proportion of their mortgage book from remortgagors looking elsewhere.
“However, it may be difficult for lenders to find the room to simply lower rates in the two-year fixed market, which consequently could lead them to look at other aspects of the mortgage package, such as fees and incentives, or higher loan-to-value sectors to attract customers
“Faced with such a big jump in monthly repayments, it clearly pays for borrowers to shop around and remortgage once their initial rate has come to an end. However, remortgage customers must consider all aspects of the mortgage to ensure they are getting the best deal for them.”