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A report from the FCA has indicated that 2.04 million borrowers in the UK have been on a reversion rate or SVR for six months or more, corresponding to roughly 25% of all mortgage borrowers.Further analysis of mortgage rate data by Private Finance suggests that residential borrowers in the UK on their lender’s Standard Variable Rate (SVR) could save over £25,000 in mortgage interest alone over the course of a decade simply by switching to a 10 year fixed deal.
These borrowers may be able to pay off their mortgage loan more than five years early by using the money saved by switching to a new deal to make overpayments.The average SVR was 4.33% in August 2018 according to the Bank of England. An SVR borrower with the typical loan of £171,936 would therefore be paying £620 per month in interest alone and would have made £64,938 in interest payments over a 10 year timeframe.
However, if they switched to today’s average 10 year fixed rate of 2.73%, they would pay £229 less in interest each month, making a saving of £25,123 over 10 years. Swapping to an even more competitive 10 year fixed rate of 2.39% results in even greater savings of £278 monthly or £30,304 over 10 years.
It also says that overpaying could knock more than five years off an ex-SVR borrower’s mortgage term. Taking into account both principal and interest payments, a typical SVR borrower on the average rate of 4.33% would pay £939 a month in total, or £281,834 over the full 25 year term.
Swapping to the average 10 year fixed deal would reduce this monthly payment to £791, resulting in a £148 saving.If the same borrower was to take this deal but put their savings to use by making additional payments of £148 per month, they would be debt free five years and three months sooner than if they didn’t make any overpayments. Borrowers able to qualify for a best buy rate could be free of their mortgage even earlier at five years and 11 months.
For more information on whether a 10 year fixed deal might be a good option for you, feel free to have a no-obligation discussion with one of our expert brokers today on 0333 363 6507 or email us at firstname.lastname@example.org.Here is a reprise of our video on the topic of BTL finance:
Call the PT Broker Hotline on 0333 363 6507 or email us at email@example.com