Although mortgage applications are largely on hold during the COVID-19 lockdown, existing mortgage holders could access savings of more than £5,000 on their payments by switching to a different fixed rate offer, according to research by Experian.
Up to 44% of the UK’s 10.8m mortgages are likely to be on the provider’s standard variable rate (SVR), which can be more than double the interest rate of the original introductory offer.
A homeowner with a £150,000 20-year mortgage loan on a typical SVR of 4.75% will have monthly repayments of £969; the same mortgage on a typical 2-year fixed rate remortgage deal of 1.25% will have monthly payments of £707.
This represents a saving of £6,288, or £262 per month, and taking the arrangement fee of £999 into account, results in an overall saving of £5,289.
However, the analysis found that only 24% of current or previous mortgage holders remortgaged at the end of their last introductory offer.
Of those that have lapsed into their provider’s SVR, 23% had done so because they thought remortgaging was too complicated, while 16% had not realied that the SVR would be more expensive.
Mortgage holders in Northern Ireland (52%) and the North East (51%) were the most likely to be paying the SVR, while the East, South East and South West regions had the lowest proportion, at 43%.
Experian conducted this analysis in light of the launch of its remortgage calculator, which aims to simplify the search process and help homeowners find the best deals on the market.
The company has also agreed to the introduction of an emergency payment freeze, meaning people’s credit scores are protected if they agree with their lender to pause their payments.
Amir Goshtai, managing director at Experian Marketplace, said: “The fact that lenders still remain open for business for remortgages presents a real opportunity for homeowners to take advantage of low rates and make a typical saving of more than £3,000.
“With so many other worries and stresses at this time, we wanted to make it much simpler for homeowners to find and switch to a better deal to help them with their finances.
“The Remortgage Savings Calculator makes it easy for people to check if they can save money on their mortgage, without impacting their credit score.
“The market is changing rapidly as lenders review their acceptance criteria and product ranges.
“This makes it particularly important to plan ahead and allow extra time to complete a remortgage, especially for higher loan-to-value ratios, and to use a broker or eligibility service to help you find the right lender.”