Borrowers could save money by switching mortgage product now
Most lenders haven’t put mortgage rates up by the same rate as the Bank of England base rate rise, but some borrowers could still benefit from a switch.
Since the Bank of England raised the base rate last month, many expected to see a significant impact on mortgage rates. In the months preceding the hike, lenders had started to increase rates in anticipation, but it seems mortgage rates have not followed the 0.25% base rate rise as expected, with an increase of only 0.18%.
The Moneyfacts Mortgage Treasury Trends Report (not yet published) shows that the average standard variable rate (SVR) has only increased by 0.14% since 1 November.
Charlotte Nelson, Moneyfacts’ finance expert said that “just 56% of providers have passed on a rise to their SVR, with seven of them choosing to increase their rates by less than the 0.25%, which has caused the average SVR to rise more modestly”.
Switch to a better deal
Whilst the SVR rise has been modest, it is still 0.12% higher than in December last year, encouraging some borrowers to think about switching to a better mortgage deal.
Despite many variable rate mortgage products seeing the full base rate increase, there could be significant savings to be made by switching to a fixed rate mortgage.
According to Moneyfacts, borrowers could save as much as £192.66 a month by switching from the average SVR to a two-year 2.35% fixed rate (based on borrowing £150,000 on a 25-year repayment mortgage). Given that financial experts are anticipating future base rate rises, prudent borrowers may well make the move from their SVRs in favour of the fixed-term safety net.
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