Give yourself a 7% pay rise by switching your mortgage
If you are sitting on your lender's standard variable rate (SVR) then you could be paying too much for your mortgage. New research from Legal and General has revealed that borrowers can effectively give themselves a 7.2%pay rise by switching to a more competitive mortgage deal.
New research from Legal and General Mortgage Club has revealed that the average homeowner could save over £2,000 a year by switching to a low-cost fixed-rate mortgage deal.
L&G say that taking a two-year fixed rate could see the average homeowner save £171.85 per month compared to those borrowers who remain on their lender's SVR. The £2,062 annual saving is equivalent to a 7.2% pay rise.
With one in six borrowers currently on their lender's variable rate - around 1.9 million homeowners - a huge portion of the UK could save a substantial amount of money simply by searching the market for alternative offers. For homeowners on SVRs across the UK, this equates to a staggering £3.9bn a year.
Jeremy Duncombe, director of Legal & General Mortgage Club, says: “Today’s borrowers today are missing out on some great opportunities to save, mainly due to complacency. Simply switching deals to a more competitive rate could make a significant difference to their everyday life, particularly at a time when wage growth is relatively low.
“Now is the perfect time to review current deals, especially for those on an SVR or coming to the end of a mortgage term. Homeowners should contact an adviser to explore the idea of swapping to a different mortgage deal, which could give them the equivalent of a hefty pay rise. Those who act now may see significant benefits in the years to come, as they’ll able to take advantage of current interest rates while they are still at an all-time low.”
'Complacent' borrowers at risk of a £681 annual cost increase
What Mortgage? reports that borrowers on their lender's current SVR of 4.74% could save over £5,000. Switching to a two-year fixed rate at 1.69% would see the average mortgage payment reduced by £221 per month. Despite the initial arrangement fee of £999, borrowers would save £5,308 over the fixed-rate term.
L&G also calculated that 'complacent' borrowers who stick with their lender's standard variable rate would pay an extra £681 every year if the base rate were to rise by just 0.5%.