Millions of mortgage borrowers will ultimately suffer whatever the decision the Bank of England makes on base rates this week, says MyMortgageDirect.
The company says that standard variable rate mortgage borrowers are this week bracing themselves for a widely tipped 0.25% rise in the Bank of England base rate. Taking the base rate to 4.25% would add around £20 a month to repayments for a homeowner with an average £150,000 mortgage.
But whether the MPC gives the green light to an increase or decides to hold off for another month, Peter Barrett of MyMortgageDirect argues that the country is now in a rising interest rate environment and it's only a matter of time before any borrower paying the standard variable rate will feel the pinch.
He says: “If you are in an SVR arrangement all you are doing is delaying the pain for a few more weeks. Because all the evidence points to rates ending this year significantly higher than they are at present.”
Research undertaken by MyMortgageDirect shows UK mortgage borrowers are overpaying by a phenomenal £2.5bn a year - purely because they have not bothered to switch from expensive and outmoded standard variable rates to one of the many discounted products now sweeping the market.
Barrett adds: “One in two of all the UK's 11.5 million mortgage accounts are being repaid at a typical SVR of 6.04%, reflecting high street mortgage lenders' mark-up from the 4% Bank of England base rate.”
“And yet the typical homeowner with a £120,000, 25-year mortgage would make an annual saving of just over £1,700 simply by tracking down one of the many loans discounted to 4% and under - they would be mad to stay in an outmoded SVR deal.”
“It is incredible when you think about it. In most cases, borrowers who are not tied in to their existing deal would save a huge amount of money, often just with a simple phone call.
“The research has highlighted the typical homeowner with a modest - in today's terms at least - loan. Yet as we know, if you live in more expensive parts of the country like London and the South-East, the average loan size is considerably higher.
“By staying on the standard variable rate - which is basically a dinosaur loan structure far more suited to maximising a lender's profits than benefiting the borrower - millions of UK homeowners are ensuring that they lose many thousands of pounds over the life of the loan,”
Latest figures from the Council of Mortgage Lenders show the UK mortgage market was worth £776bn at the end of 2003. While there are 11.5 million mortgage accounts, the majority of these are joint accounts and the CML puts the total number of UK mortgage holders at around 20 million.