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Home owners are rushing to snap up cheap remortgage deals this January as potential savings run to many thousands of pounds per year.
Brexit uncertainties and fears over when rates will rise mean new mortgage deals are unlikely to get any cheaper, so borrowers are hoping to lock into low-cost loans before it is too late.
New research from TSB found that almost a third of eligible borrowers are planning to seek a better deal, yet many are underestimating how much they could save.
According to the survey of 2,000 homeowners, the average saving they expected to make from remortgaging their property was estimated at £49 a month. However, many borrowers could save a lot more.
Figures from the Council of Mortgage Lenders suggest that around 3.6m borrowers are not currently tied in to a fixed-rate deal and should therefore be free to remortgage if a more competitive offer is available.
Often borrowers roll onto their lender’s standard variable rate (SVR), which is the default option at the end of a fixed-rate deal. These rates are rarely the most competitive choice.
Some lenders SVRs are particularly high. Take Accord for example, which is part of Yorkshire Building Society, and has an SVR of 5.34 per cent or Clydesdale Bank, which has an SVR of 4.7 per cent. Compare these to best buy rates and there are huge savings to be made.
A borrower with a £200,000 mortgage on Accord’s SVR of 5.34 per cent would pay £1,209 per month. If they qualified for Nationwide Building Society’s two-year fixed rate at 1.19 per cent (available up to 60 per cent loan-to-value) they would cut their monthly payments to just £771.
That’s a saving of £438 every month. Over two years the Nationwide borrower would save nearly £9,500 even after paying the £999 product fee.
Private Finance managing director Simon Checkley says: “If you are coming to the end of a fixed rate or discounted deal, or if you have already rolled on to your lender’s default rate, the chances are there are savings to be made.
“The cost of new mortgage deals are still close to record lows, but there is no telling when prices may rise so borrowers looking for payment security should consider fixing their mortgage while the environment remains favourable.”