Homeowners ‘could save thousands of pounds’ by switching mortgage
With further rate rises expected, switching could save some people thousands of pounds over a relatively short period of time, according to research
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Your support makes all the difference.Some mortgage borrowers may find they could save around £3,500 over two years by moving off a standard variable rate (SVR) onto a new deal, research suggests.
Working with L&C Mortgages, Experian calculated that some homeowners may be able to save over £3,500 if they switched to a new fixed-rate two-year offer.
The calculations were based on certain assumptions and so the potential savings that someone could potentially make by moving off their SVR will depend on individual circumstances.
The research was based on someone having a £150,000 25-year mortgage loan. The calculations were made in early September and looked at particular mortgage deals.
Researchers also took into account a £999 arrangement fee for taking out the new deal, but still found that someone could end up £3,562 better off over the two-year period, based on the specific calculation.
Lenders have typically been passing on the latest base rate rise to those on standard variable rates, which are higher than the best deals on the market
Experian said that, according to its data, nearly 300,000 homeowners could be coming to the end of their fixed-term deal in the next three months, and without re-mortgaging they may roll over onto their existing lender’s SVR.
When mortgage borrowers are shopping around for a new deal, they should also consider any early repayment charges that may apply to their current mortgage, as well as any fees for taking out the new mortgage, when deciding whether switching is worthwhile.
David Hollingworth, associate director, communications at L&C Mortgages, said: “Mortgage rates have been rising rapidly and homeowners who don’t shop around for the best deals could find themselves paying even more than they need to.
“Lenders have typically been passing on the latest base rate rise to those on standard variable rates, which are higher than the best deals on the market.
“With more rises on the cards, it remains the case that switching could save thousands of pounds over a short period of time.
“A mortgage comparison site will help you check whether you are on the cheapest deal but remember to factor in any other costs or if there is an early exit fee associated with your current deal.
“Advice will help you decide whether to make the switch and identify the best overall fit for you.”
Using Bank of England figures, Experian also calculated that if motorists were to explore the option of car refinancing, some may potentially be able to save up to £1,200 over four years by making a switch to a better deal.
The calculation, based on someone switching to a loan with a lower interest rate, was based on a car owner with a £15,000 loan payable over four years and, again, individual circumstances will vary.
Experian added that searches for balance transfer cards were up by over 50% on its comparison website in July, compared to the same month last year, in a sign that people are looking for ways to cut the cost of their borrowing.
The findings were released amid expectations that the Bank of England is poised to make a hefty hike to the base rate this week, pushing up costs for some borrowers.
The current base rate is 1.75%, but there has been speculation that the rate could jump to 2.25% or even 2.50% on September 22, in a bid to control inflation.
James Jones, head of consumer affairs at Experian, said: “As rising prices continue to bite, many of us are exploring ways to help make ends meet.
“This can include switching existing borrowing to better deals, such as more competitive interest rates and repayment terms, which can translate into meaningful monthly savings.”
People looking for a better deal can try doing a “soft” search online, which can give an indication of how likely it is they might be accepted, without the search having an impact on your credit score.
Mr Jones said: “Before switching, it’s important to carry out an eligibility check using a comparison service. This will help you shop around and compare multiple deals and identify the offers you’re most likely to be accepted for, without damaging your credit score.”
By contrast, a “hard” credit check happens when a complete search of a credit report is made – and too many of these in a short space of time can indicate to companies that a borrower is struggling.