What is your mortgage interest rate at the moment? How many people would honestly be able to answer this question without searching through their home-file?
In the past, people usually looked around for a better mortgage at the end of their fixed or tracker rate. Going onto the Standard Variable Rate (SVR) used to be seen as something to avoid.
There is a misconception that the SVR is lower for every mortgage borrower. The reality is that the low Bank of England base rate is helping to hide that fact that many people are paying well over the odds on their current mortgage.
Many borrowers have found to their cost that each mortgage lender is responsible for deciding what to charge on the SVR. They can, and have increased the rate even though the Bank of England rate has remained unchanged for some time. The first you will know about this is when the letter arrives from your lender increasing your mortgage payments.
Lenders rely on savers to provide them with the funds to lend back out as loans and mortgages. If they fall short of funds, they need to attract new savers. Offering a plumb rate to savers often involves them increasing the cost of borrowing for their existing borrowers.
Your SVR may not always be the same as other borrowers with the same mortgage lender. For example, some customers of Lloyd's/C&G or Nationwide will be paying just 2.5% - this is not the case for all of their customers. More recent borrowers with these lenders are treated differently. The new rate is 1.49% higher than the old rate; at 3.99%. Some other lenders charge anything between 4 and 5%.
The dangers of reviewing your mortgage with your current mortgage lender...
Your own mortgage lender certainly won’t want to tell you about mortgages available from their competitors! Never rely on your lender to give you an impartial view, even of their own products!
Your own lender would rather secure your re-mortgage business, in house. Their staff will be incentivised to ‘sign you up’ to a new mortgage product. Even if you have a decent, low cost SVR rate, it is in your lenders interest to move you onto a new product with the higher SVR at the end of your deal.
With VAT and taxes due to rise next year, and benefits facing review, every household is likely to be affected by the austerity measures planned. To sit on the SVR and ignore the potential savings in the face of higher taxes and frozen wages is something few of us can afford to do.
A decent whole of market adviser can help you review your current mortgage. An honest and ethical adviser will tell you when it’s not right to change. For many people, doing nothing is simply lining the pockets of the bank or building society to whom they remain loyal.
