Fix or Stick With a Standard Variable Rate

by Mark Johnston

With interest rates at an all time low, borrowers are enjoying much lower monthly repayments than ever before. Many homeowners are staying on their lenders standard variable rate (SVR) than ever before. This is may partly be due to the issues borrowers are having with re-financing their homes following the recent financial crisis.

Most borrowers are on low standard variable rates (SVR) as they took their mortgages out before the credit crunch. More and more people are moving to these types of mortgages as their fixed and tracker mortgages come to an end.

Over 2.6 million borrowers are now on some sort of standard variable rate which works out about 28% of the UK mortgage market against only 1.6 million a year ago.

Many mortgage lenders are now looking at more and more creative ways of tempting borrowers away from their standard variable rate. Although the Uk mortgage market is still struggling in the wake of the credit crunch and first time buyers are finding it difficult to get mortgages, many lenders are offering good deals to those with equity within their property or large deposits.

The average SVR is around 4.75% although have seen some lenders charging as low as 1.5% to homeowners who have moved from a fixed rate mortgage after their initial term has ended. That said there are some excellent deals if you take the time to look.

The Yorkshire Building Society has a great deal for those with a 25% deposit. The Northern lender is offering its 2 fixed rate mortgage at 2.99% with a £495 arrangement fee. Whilst the Chelsea is offering its 2 year fixed at 2.59% and charging a respectful £495 as a fee.

Tom Girling, mortgage product manager at Yorkshire Building Society said “’A record number of borrowers are stuck in mortgage limbo on standard variable rates that are far higher than best-buy deals”

Tom was carrying out research into the standard variable rate market and went on to say: “Our analysis shows that 75 per cent of them could make significant savings by switching to a better deal. And as they are on an SVR, they are free to switch lender immediately without incurring penalty fees.”

Melanie Bien, director of mortgage broker Private Finance, says “while borrowers may like the flexibility of an SVR, fixes are unlikely to fall much further – and she warns people could lose out if they wait until rates rise. If house prices fall, as has been predicted, you could end up with less equity, making it more difficult to remortgage, or at least at a competitive rate,”

Those of you on the lower standard variable rates may have little reason to move but should keep an eye on news to keep up to date with new offers and UK house prices. Better deals are coming out almost every day as lenders start to fight for the less risky end of the mortgage market.

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