The latest data from Moneyfacts.co.uk has revealed that the current average standard variable rate (SVR) mortgage for July 2020 is 4.46%.
This would be a rate jump of almost 2% compared to the initial average 2-year fixed rate deal they may have taken out in July 2018 (2.52%).
July 2020 saw the average 2-year fixed rate reduce to a historic low of 1.99%, meaning that those who are on their current SVR could be paying 2.47% more than if they were to have switched to a new 2-year fixed deal at the start of this month.
However, those in a position to consider a new mortgage deal may wish to move quickly, as over the course of this month, average rates have begun to rise.
Eleanor Williams, finance expert at Moneyfacts.co.uk, said: “Following the significant fixed rate war in 2019 and ever-tightening margins for mortgages, it was unclear how much impact the coronavirus pandemic and subsequent Bank of England base rate cuts (still at a historic low of 0.10%) would have on fixed mortgage deals.
“It was therefore great news for borrowers that approximately three months on from the second cut to base rate – in line with when we would traditionally expect to see reductions filtering down to products – that average mortgage rates, such as the two-year fixed product, hit its record low of 1.99%.
“This seems to demonstrate that despite a volatile economic landscape, mortgage lenders are keen to lend at competitive levels where possible, particularly to those with higher levels of equity.
“Our latest research compares what those borrowers whose two-year fixed rate mortgages taken out in 2018 are likely to be facing as they now revert to a follow-on or SVR – currently sitting at an average rate of 4.46%.
“The average two-year fixed rate at the start of July 2018 was 2.52%, which means that those who are now reverting to their lender’s SVR could be looking at a rate increase of 1.94%.
“Financially, this could have meant that their monthly payments increased by £202.08 per month if they had not secured a new deal at the beginning of the month, when the average rate for a two-year deal was 1.99%.
“Considering current circumstances and the wide-spread concerns around household income many are experiencing at this time, this difference in payment could give an extremely welcome boost to monthly income.
“If those eligible to take the plunge and seek out a new deal need any further incentive, over the course of this month, we have seen the average rate for a two-year fixed deal begin to climb again.
“By 27 July, this had increased to 2.05%, a 0.06% increase from where we started this month.
“Our analysis shows that this trend is currently borne out across the various loan-to-value (LTV) sectors for this part of the market, where all bar the 50% and 65% LTV bandings have increased since the start of the month.
“However, when compared against the average SVR rate and based on remortgaging to today’s overall 2-year fixed average rate of 2.05%, those moving to a new 2-year deal could still potentially be almost £195 per month better off.
“With the average SVR likely to remain more static moving forwards and the mortgage market itself remaining fluid, as lenders continue to amend their ranges in reaction to an ever-evolving landscape, there is no guarantee that rates will not continue to increase.
“However, as there remains an almost 2.50% difference between the average SVR and the average 2-year fixed rate today, the benefits of switching speak for themselves, as being able to save significantly on monthly outgoings could be more important than ever in these uncertain times.
“Those who wish to explore whether they are able to reduce their rate, and consequently their monthly mortgage payment, would do well to move swiftly.
“As with any financial commitment, seeking advice from an independent, qualified adviser has never been more relevant, as understanding the true cost of any new deal, taking into account any fees and incentives, and indeed keeping up-to-date on the available products and criteria could be made significantly easier with assistance from a professional.”