An estimated 32% of borrowers who have been negatively financially impacted by COVID-19 intend to stay on their lender’s standard variable rate (SVR), according to Legal & General Mortgage Club.
This could impact over 700,000 borrowers who will reach the end of their 2 and 5-year residential fixed-rate mortgages in 2021.
More than half (52%) of borrowers who have seen their income reduced as a result of the crisis are concerned that lenders will now be scrutinising their finances in more depth compared to pre-COVID levels.
Half of borrowers are concerned that their decision to take a payment ‘holiday’ will affect their future mortgage options, and 67% believe it will be harder to get a mortgage when furloughed.
Looking to those who have seen their incomes negatively impacted by the pandemic, 14% are more likely to feel ‘not confident’ about remortgaging, compared to 3% of those who have remained stable.
According to Legal & General Mortgage Club, moving onto a lender’s SVR could increase annual mortgage repayments by over £2,500.
Among those who do not plan to revert to their lender’s SVR, 52% intend to stick with their current lender, with 37% doing so because they believe this will be the easiest way to secure a new deal.
Kevin Roberts, director of Legal & General Mortgage Club, said: “While the coronavirus crisis has undoubtedly affected people’s finances in different ways, those who have seen their incomes drop will likely be finding this a particularly challenging time so it’s vital they avoid falling onto a reversion rate and paying more when there are other affordable options available.
“COVID-19 may have dampened the confidence of a large number of borrowers wanting to lock into a new rate, yet the cost of not exploring their refinance options could be significant.
“Even for those borrowers who have seen a reduction in income, there may well be products available that would save them money in the long term when compared to their lender’s SVR.
“There are still thousands of great fixed rate-deals available, including furlough-friendly mortgages for those who have or continue to draw support from the government’s Job Retention Scheme.
“The UK also has a thriving specialist lending sector designed to help borrowers with complex circumstances, from the self-employed to those who might have experienced a credit blip, many of whom can only be accessed through speaking with an independent adviser who could help these borrowers to save thousands of pounds in their mortgage repayments.”