Research from Your Move has revealed that borrowers switching to discounted rates pocket the highest savings in more than a year.
First year savings on discounted variable rates have reached their highest level for over a year with rates at their lowest since last summer, spurred on by the base rate cut.
Your Moves August Remortgage Index, tracks first year savings achieved from switching from a 100,000 standard variable rate (presently averaging 6.59%), to the Best Buy rate in different classes.
Mortgage shoppers can now benefit from higher first year savings with discounted rate deals for both two and three years, at 1,930 and 1,770 respectively. Discounted rate full term savings are now at their highest level since before January 2004.
Over the last month, changes amongst discounted rates have been significant, although in comparison to fixed rates they have changed relatively little over the last year. Three year discounted variable rate first year savings have risen by 10% while three year fixed rates savings have not changed.
Jon Round, remortgage analyst at Your Move, says:
“While discounted variable rate mortgages have cheapened, fixed rates have remained, so far, stable.
“Borrowers are still preferring fixed rate deals, not least because these fixed rates are likely to rise over the next few weeks due to increasing concerns about inflation which are threatening to scupper further base rate reductions. It may thus still be wise to choose fixed rates despite the immediate savings on discounted variable rates being higher.
“Both fixed and discounted rate mortgages currently offer high first year savings. Savings with discounted rates have shot up over the last month, reaching their highest for more than a year. Although fixed rate deals have changed little over the last month savings with two, three and five year deals have at least doubled since this time last year.
“However, borrowers need to consider the full picture. Although discounted rates offer higher savings this month, fixed rates remain competitive and borrowers on discounted rates need to be fully aware that repayments can increase rapidly if base rates go up.”