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Standard Variable Rate mortgage holders could save £500 a month

A recent report from ComparetheMarket.com has revealed that Standard Variable Rate mortgage holders could save £500 a month by switching to a fixed rate. Here is a full breakdown of how much you could save and what to do if you're worried about your mortgage.

A photo of Daniel Sharpe-Szunko, the author

By Daniel Sharpe-Szunko

Published on: 27 February 2024

4 min read

Standard Variable Rate mortgage holders could save £500 a month

A recent report carried out by Comparethemarket.com has found that mortgage borrowers in the UK could be costing themselves over £500 a month. Figures from UK Finance suggest that around 1.6 million fixed-rate deals are due to come to an end in 2024, adding to 800,000 last year. This figure doesn’t include variable rate mortgages, including tracker and discount mortgages, that have already risen sharply.

Less than 30% of households in Britain owns their property outright without any mortgage, which means that a large proportion has a debt on their home. This recent report highlights the amount that homeowners can save by switching their existing mortgage from Standard Variable Rate (SVR) to a new Fixed Rate deal.

The analysis was based on a 5 year fixed rate mortgage of £254,500 with an interest rate of 5.18%, that would give a monthly mortgage repayment of £1,394. When this was compared to a typical Standard Variable Rate of 8.17%, mortgage repayments would be £1,898 which is £504 higher.

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60-Second Summary – Mortgage borrowers could save over £500 per month

Every year in the UK, millions of mortgage deals come to an end and revert back to the lenders Standard Variable Rate (SVR). This is the rate that a lender offers to borrowers that are not on a Fixed or Discount rate deal, which is usually significantly more expensive.

Mortgage borrowers are urged to check when their mortgage deal comes to an end or find out whether they’re already out of the special deal period. Any Standard Variable Rate mortgages are naturally significantly more expensive than a special rate.

  • Recent mortgage market research from comparethemarket.com has shown that borrowers could save over £500 a month on their mortgage repayments.
  • An estimated 1.6 million mortgage fixed rate deals are due to come to an end in 2024 and borrowers could experience financial difficulties from inflated interest rates.
  • Mortgage interest rates have increased dramatically over the past several years and borrowers are now paying £100’s more every month than 2019.
  • 100,000’s of UK households are experiencing severe financial difficulty following the recent interest rate rises and being unable to switch to another deal.

According to figures from MoneyFacts on 1st February 2024, the average Standard Variable Rate in the United Kingdom is 8.17%. This compares to an average SVR rate of around 4.41% in December 2020 which can equate to £100’s more every month on mortgage repayments.

Mortgage lender Standard Variable Rates usually sit 2 or 3 percent higher than the Bank of England Base Rate (BBR), which is currently set at 5.25% in the UK. Interest rates have stabilised in 2024 and have held at the same rate for the past 4 months, presenting some positivity for homeowners.

The report by Compare the Market also suggests that the average Standard Variable Rate in the UK has risen by a mind blowing 1.33% in the past 12 months.

The average Standard Variable Rate in 2023 was reported to be 6.84% and that represents a significant increase in mortgage repayments. Mortgage borrowers have seen consistent increasing repayments if on a variable rate mortgage, including tracker mortgages, discount mortgages and especially Standard Variable Rate mortgages.

Anyone who is on a Standard Variable Rate mortgage currently or is expected to be going to one in the next 6 months, can usually change to a special deal (e.g. fixed rate, discount rate etc.). Mortgage borrowers can usually compare mortgage deals online on the mortgage calculators that are available or speak to a mortgage expert, to find out what deals are available.

As it is suggested in the report from Compare the Market, a mortgage borrower in the UK could save over £500 per month (or £6,048 a year) by changing to a fixed rate deal from a Standard Variable Rate. Borrowers will usually be able to switch from a Standard Variable Rate mortgage to a fixed or discount rate mortgage without any penalties or Early Repayment Charges (ERC’s).

Our mortgage experts are predicting a period of stability in the mortgage interest rates in the UK, meaning that it could be a good time to review your current mortgage rate. This is especially true for people currently paying the lenders Standard Variable Rate and therefore will be on a higher rate than they could be.

The Bank of England Base Rate (BBR) has held firm at 5.25% since December 2023 which is a significant improvement to the previous period since 2019, where we saw 14 consecutive increases. It is unlikely that mortgage interest rates will return to pre-pandemic levels of 2% for Fixed Rate deals and a Base Rate of 0.25%.

Some economists are still predicting a further rise of 0.25% to 5.5% in the UK following the recent recession, but these forecasts are still speculative.

If you need help to find the best new mortgage or remortgage deals then it is more important than ever to get proper advice from a mortgage expert. Mortgage rates and deals are still volatile in the UK and it’s more difficult than ever to apply for a mortgage online, simply because of how complicated mortgage applications are currently.

We’re seeing more mortgage applications being refused or referred, because of complicated mortgage lending criteria. To avoid any of these issues, which can cause delays and can cost you £100’s in mortgage application fees that aren’t refundable, you can get help from a mortgage advisor.

For help with your mortgage you can speak to one of our mortgage experts by CLICKING HERE.

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