Consumers with a mortgage at one of the UK’s big six lenders could be losing more than £3,000 a year by staying on their provider’s standard variable rate (SVR).
Research by online mortgage broker Trussle looked at the UK’ s biggest lenders - Lloyds, Nationwide, Santander, RBS, Barclays and HSBC - which represent 69% of the total mortgage market.
It found borrowers who let their fixed or tracker rate deal expire and end up on the SVR typically pay 2.5% more than the best two-year fixed rate deal. This is equivalent to a £3,242 yearly penalty for the average borrower.
Equally concerning is the fact two-thirds of borrowers are unaware that a SVR is nearly always worse value than a fixed rate deal.
Trussle estimates around three million mortgage customers are on a lender’s SVR, although one million of these are ‘mortgage prisoners’ who are unable to move elsewhere – an issue Moneywise has reported on this year.
However, around two million homeowners could remortgage and make an instant saving.
‘Industry could agree upper limit on SVRs’
Ishaan Malhi, CEO and founder of Trussle, says: “Borrowers are being put at a huge disadvantage by not understanding the implications of lapsing onto their lender’s standard variable rate. This costs UK homeowners an alarming £10 billion a year in interest payments.
“The industry, its regulators, and the UK government can address these challenges by working together. Potential solutions could be to agree a reasonable upper limit on SVRs, and a system where lenders are not only obliged to warn their mortgage customers well in advance of their fixed rate coming to an end, but also to confirm receipt of this notification.”
A Moneywise poll of 9,000 readers found that almost three-quarters of mortgage borrowers say they have no plans to remortgage in the coming year.
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