Mortgage mistake costing 600,000 homeowners £4,600 a year – and easy way to fix it --[Reported by Umva mag]

HUNDREDS of thousands of homeowners are making a costly mortgage mistake that is adding thousands of pounds a year to their bills. Borrowers who fail to take out a new mortgage in time before their term ends are automatically shifted on to their lender’s Standard Variable Rate (SVR). GettyFalling onto a SVR could be a costly mistake for borrowers to make[/caption] These default rates are typically far higher than fixed or variable deals and the difference can translate into thousands of pounds extra on mortgage bills. A whopping 600,000 mortgage borrowers are currently on a costly SVR, according to UK Finance, and could be overpaying by thousands of pounds a year. The average standard variable rate currently stands at a whopping 7.96%, according to data site Moneyfacts.co.uk. The Sun has asked all of the major mortgage lenders for their current SVRs and we will update this article once we hear back. In comparison, the average two-year fixed rate is currently 5.37%. The difference means that homeowners could be missing out on annual savings of more than £4,000, according to Mojo Mortgages. For an average-priced home in the UK – £267,100 – with a 75% loan-to-value (LTV) ratio, you’d be looking at a monthly repayment of £1,447 on a 7.25% SVR. Whereas a five-year fixed-rate of 4.05%, monthly mortgage payments stand at £1,062. Over a year, that adds up to a difference of £4,620. For a two-year fix with a rate of 4.52%, the potential average savings compared to a SVR would be £3,984. Experts have warned that falling on to an SVR is a costly mistake to avoid. A spokesperson for Mojo Mortgages said: “If you’re unsure what interest rate you’re on, you should review your mortgage statement. “This will typically include your current interest rate. Look for sections labelled “interest rate” or “current terms”.  “If your statement doesn’t provide this confirmation, reach out to your mortgage lender directly.” When you come to the end of your mortgage, your current lender will usually offer you to switch to a new deal – it tends to be an easy process and you can switch as much as six months before your deal ends to make sure you don’t sli[ on to an SVR. Even if you’re in difficulty, your lender should help you find the best deal for your circumstances. There are very few instances when a mortgage adviser, or broker, would recommend a borrower be on a SVR. Chris Sykes, technical director at broker Private Finance, previously told The Sun: “The only real situation, i’d recommend a client be on an SVR is where they’re looking to sell the property in the very near future. “If they’re looking to sell it in the longer term, it’s probably better to go on to a tracker rate with no early redemption fees.” Tracker mortgages have variable rates, but are likely to be lower and linked to the BoE base rate than SVRs. Unlike fixed-rate mortgages it’s easier to find tracker mortgages without any early repayment fees so you can exit the deal if you sell your home, for example. SVR rates can move up and down at any time but lenders often adjust these rates in response to changes in the Bank of England base rate. Should you fix your mortgage now? If you’re looking for peace of mind over your mortgage payment a fixed rate deal is likely to be the best option. Your repayments won’t rise, or fall, for the duration of the deal so you can budget with confidence. Most fixed-rate mortgages come with large early repayment fees, so if you believe you could want to exit the deal before the term ends – for example, if you move home – a variable rate without exit fees may be a better bet. A good independent mortgage broker can help you weigh up the pros and cons of different mortgage options. How to get the best deal on your mortgage IF you're looking for a traditional type of mortgage, getting the best rates depends entirely on what's available at any given time. There are several ways to land the best deal. Usually the larger the deposit you have the lower the rate you can get. If you’re remortgaging and your loan-to-value ratio (LTV) has changed, you’ll get access to better rates than before. Your LTV will go down if your outstanding mortgage is lower and/or your home’s value is higher. A change to your credit score or a better salary could also help you access better rates. And if you’re nearing the end of a fixed deal soon it’s worth looking for new deals now. You can lock in current deals sometimes up to six months before your current deal ends. Leaving a fixed deal early will usually come with an early exit fee, so you want to avoid this extra cost. But depending on the cost and how much you could save by switching versus sticking, it could be worth paying to leave the deal – but comp

HUNDREDS of thousands of homeowners are making a costly mortgage mistake that is adding thousands of pounds a year to their bills.

Borrowers who fail to take out a new mortgage in time before their term ends are automatically shifted on to their lender’s Standard Variable Rate (SVR).

Getty

Falling onto a SVR could be a costly mistake for borrowers to make[/caption]

These default rates are typically far higher than fixed or variable deals and the difference can translate into thousands of pounds extra on mortgage bills.

A whopping 600,000 mortgage borrowers are currently on a costly SVR, according to UK Finance, and could be overpaying by thousands of pounds a year.

The average standard variable rate currently stands at a whopping 7.96%, according to data site Moneyfacts.co.uk.

The Sun has asked all of the major mortgage lenders for their current SVRs and we will update this article once we hear back.

In comparison, the average two-year fixed rate is currently 5.37%.

The difference means that homeowners could be missing out on annual savings of more than £4,000, according to Mojo Mortgages.

For an average-priced home in the UK – £267,100 – with a 75% loan-to-value (LTV) ratio, you’d be looking at a monthly repayment of £1,447 on a 7.25% SVR.

Whereas a five-year fixed-rate of 4.05%, monthly mortgage payments stand at £1,062.

Over a year, that adds up to a difference of £4,620.

For a two-year fix with a rate of 4.52%, the potential average savings compared to a SVR would be £3,984.

Experts have warned that falling on to an SVR is a costly mistake to avoid.

A spokesperson for Mojo Mortgages said: “If you’re unsure what interest rate you’re on, you should review your mortgage statement.

“This will typically include your current interest rate. Look for sections labelled “interest rate” or “current terms”. 

“If your statement doesn’t provide this confirmation, reach out to your mortgage lender directly.”

When you come to the end of your mortgage, your current lender will usually offer you to switch to a new deal – it tends to be an easy process and you can switch as much as six months before your deal ends to make sure you don’t sli[ on to an SVR.

Even if you’re in difficulty, your lender should help you find the best deal for your circumstances.

There are very few instances when a mortgage adviser, or broker, would recommend a borrower be on a SVR.

Chris Sykes, technical director at broker Private Finance, previously told The Sun: “The only real situation, i’d recommend a client be on an SVR is where they’re looking to sell the property in the very near future.

“If they’re looking to sell it in the longer term, it’s probably better to go on to a tracker rate with no early redemption fees.”

Tracker mortgages have variable rates, but are likely to be lower and linked to the BoE base rate than SVRs.

Unlike fixed-rate mortgages it’s easier to find tracker mortgages without any early repayment fees so you can exit the deal if you sell your home, for example.

SVR rates can move up and down at any time but lenders often adjust these rates in response to changes in the Bank of England base rate.

Should you fix your mortgage now?

If you’re looking for peace of mind over your mortgage payment a fixed rate deal is likely to be the best option.

Your repayments won’t rise, or fall, for the duration of the deal so you can budget with confidence.

Most fixed-rate mortgages come with large early repayment fees, so if you believe you could want to exit the deal before the term ends – for example, if you move home – a variable rate without exit fees may be a better bet.

A good independent mortgage broker can help you weigh up the pros and cons of different mortgage options.

How to get the best deal on your mortgage

IF you're looking for a traditional type of mortgage, getting the best rates depends entirely on what's available at any given time.

There are several ways to land the best deal.

Usually the larger the deposit you have the lower the rate you can get.

If you’re remortgaging and your loan-to-value ratio (LTV) has changed, you’ll get access to better rates than before.

Your LTV will go down if your outstanding mortgage is lower and/or your home’s value is higher.

A change to your credit score or a better salary could also help you access better rates.

And if you’re nearing the end of a fixed deal soon it’s worth looking for new deals now.

You can lock in current deals sometimes up to six months before your current deal ends.

Leaving a fixed deal early will usually come with an early exit fee, so you want to avoid this extra cost.

But depending on the cost and how much you could save by switching versus sticking, it could be worth paying to leave the deal – but compare the costs first.

To find the best deal use a mortgage comparison tool to see what’s available.

You can also go to a mortgage broker who can compare a much larger range of deals for you.

Some will charge an extra fee but there are plenty who give advice for free and get paid only on commission from the lender.

You’ll also need to factor in fees for the mortgage, though some have no fees at all.

You can add the fee – sometimes more than £1,000 – to the cost of the mortgage, but be aware that means you’ll pay interest on it and so will cost more in the long term.

You can use a mortgage calculator to see how much you could borrow.

Remember you’ll have to pass the lender’s strict eligibility criteria too, which will include affordability checks and looking at your credit file.

You may also need to provide documents such as utility bills, proof of benefits, your last three month’s payslips, passports and bank statements.

The following news has been carefully analyzed, curated, and compiled by Umva Mag from a diverse range of people, sources, and reputable platforms. Our editorial team strives to ensure the accuracy and reliability of the information we provide. By combining insights from multiple perspectives, we aim to offer a well-rounded and comprehensive understanding of the events and stories that shape our world. Umva Mag values transparency, accountability, and journalistic integrity, ensuring that each piece of content is delivered with the utmost professionalism.

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