Are You Paying More Than Necessary For Your Mortgage?

 

The mortgage situation in the UK is constantly changing, and homeowners need to stay informed to make the best decisions for their situation. Martin Lewis, the founder of MoneySavingExpert.com, recently drew attention to a crucial issue affecting many UK homeowners – being on their mortgage lender’s Standard Variable Rate (SVR).

In this article, the team at Quealy & Co Financial Services Ltd. explain why being on an SVR could be a costly mistake and offers insights into better mortgage options.

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Understanding The Standard Variable Rate (SVR)

The SVR is the default mortgage interest rate that your lender will charge after your initial mortgage deal, such as a fixed or tracker rate, comes to an end. While it offers flexibility, as there are usually no early repayment charges, it often carries higher interest rates compared to other available mortgage deals.

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Why Is Staying On Your SVR A Bad Idea?

The recent research indicates that remaining on an SVR can significantly increase your mortgage costs. This is primarily because SVR rates are commonly higher than other mortgage options like fixed or tracker rates. The SVR fluctuates based on the lender’s discretion, often influenced by changes in the Bank of England’s base rate, but not always directly correlated. This uncertainty can lead to unpredictably high payments.

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An Example Of A Standard Variable Rate Vs A Fixed Rate Mortgage

If you had a £200,000 mortgage over 25 years, the difference between a 8% SVR and a more competitive 4.5% fixed rate could be significant. On the SVR, you’d pay around £1,542 per month, whereas the fixed rate would cost about £1110 monthly. That’s an annual difference of £5184, highlighting the unfavourable financial impact of staying on an SVR.

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How Do Homeowners End Up On SVR?

Many homeowners find themselves on an SVR without even realising it. This situation usually occurs at the end of a fixed or tracker mortgage deal. Lenders generally switch your mortgage to the SVR automatically once your initial mortgage deal expires. Unfortunately, many people miss this switch, only noticing when their mortgage payments rise.

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The Importance Of Regular Mortgage Reviews

Regularly reviewing your mortgage is essential. It makes sure that you are always on the most advantageous rate according to your circumstances and the market. Mortgage advisors can help in this process, offering professional advice tailored to your financial situation.

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Alternatives: Fixed And Tracker Rate Mortgages

• Fixed-Rate Mortgages: A fixed-rate mortgage guarantees your interest rate remains constant for a set period, typically 2 to 5 years. This option provides stability and predictability in your payments, protecting you from any sudden increases in interest rates.
• Tracker Mortgages: Tracker mortgages, on the other hand, have an interest rate that ‘tracks’ a nominated rate (usually the Bank of England’s base rate) plus a set percentage. While they can offer lower rates than SVRs, they also carry the risk of increasing if the base rate rises.

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The Benefits Of Switching

Switching from an SVR to a fixed or tracker rate can result in significant savings. It not only provides peace of mind but also helps in better financial planning. However, it’s crucial to consider any fees or penalties that may apply when switching mortgage types.

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The Role Of Mortgage Advisors

A mortgage advisor can play an important role in helping you navigate through the numerous options available. They can assess your current financial situation, understand your future goals, and recommend the most suitable mortgage type for you.

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Take Action

If you are on an SVR, it may be time to review your mortgage. Assess the alternatives and consider speaking to a mortgage advisor for tailored advice. Making an informed switch could save you a considerable amount of money in the long run.

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Do You Have Questions About Your Current Mortgage?

The key takeaway for you should be – make sure you get regular financial advice about your mortgage to ensure you are getting the best possible deal for your circumstances and the current market.

Our Financial Services team are ready to help first-time buyers, current homeowners, and property investors. Get in touch with our friendly team to find out how we can help you get the best mortgage deal for you.

01795 505761

john.king@quealy.co.uk

hayley@quealy.co.uk

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Disclaimer

This article is for information purposes only and should not be used as a substitute for professional financial or mortgage advice. Always consult with a qualified professional to make any decisions for your specific circumstances.

**Your home may be repossessed if you do not keep up repayments on your mortgage.**

Quealy & Co Financial Services Ltd. is authorised and regulated by the Financial Conduct Authority No. 919693