Remortgaging could save you £1,200 a year

8 November 2011

Mortgageholders are missing out on substantial monthly savings - up to £1,200 a year - because they never remortgage, claims Barclays.

Other than when moving home, 58% of homeowners have never switched mortgage deals, yet, depending on the deal, they could save more than £100 a month, according to a survey by the bank.

A homeowner would pay £858.63 a month, based on a 25-year £150,000 mortgage from any lender, with a standard variable rate (SVR) of 4.79%. Remortgaging to Barclays great escape two-year fix at 3.49% would see monthly payments drop to £750.13 - a saving of £108.50 a month.

The best mortgage rates on the market


"The fact that around six in 10 homeowners have never changed their mortgage outside of moving house suggests that they simply don't realise the level of savings to be made by remortgaging," says Andy Gray, head of mortgages at Barclays.

Barclays estimates in total there are more than 900,000 homeowners on a SVR with no early repayment charges who are failing to capitalise on changing mortgage deals.

"As monthly outgoings rise, and Brits fight to cut their costs, it's important that [homeowners] consider addressing their mortgage," says Gray.

In the same Barclays survey, 44% of respondents claim to have spent more time on money saving measures in the past 12 months than ever before but these efforts are concentrated on everyday expenses such as food and clothes.

Make the switch

If you haven't yet considered changing mortgage deals, here are some pointers to get you thinking.

Never stay on the SVR

The standard variable rate is the interest rate that mortgages revert to at the end of fixed terms or introductory offers – meaning it's always that bit higher.

Look at the LTV

When comparing prospective mortgage offers, don't forget to look at the loan to value ratio: this is how much the mortgage lender is willing to lend and how much it expects the borrower to stump up themselves. The higher the LTV, the better the deal.

With remortgaging it's slightly different because you don't need an initial deposit and should therefore need to borrow less money, but lenders will still want to assess the risk of lending to you and your financial situation will determine whether you can access deals with lower LTVs or not.

To fix or not to fix?

While the base rate remains at 0.5%, fixed-rate mortgages and tracker deals look attractive because the interest you pay is pegged to the low base rate.

Of course, there is always the danger that you fix and after a year more competitive offers come onto the mortgage market. And your tracker deal will increase dramatically when the base rate finally goes up.

It's worth talking to a professional mortgage adviser – ideally not one attached to your bank or mortgage lender – to help you decide.

Loyalty doesn't pay

There's no reason to stick with your existing lender unless it can come up with a competitive mortgage deal. Lenders rely on borrowers ‘misplaced sense of loyalty' to keep them paying higher SVRs. Go to the provider with the best deal.

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