Millions paying £2,600 a year too much on their mortgage

New research from a leading mortgage broker has revealed that more than one in three homeowners are paying thousands of pounds a year more than they need to on their mortgage.

L&C research has found that 36% of homeowners – around four million people – are sitting on their lender’s standard variable rate rather than seeking out a more competitive mortgage deal.

The average homeowner could save £2,590 a year

Once your fixed or discounted mortgage deal ends, you will generally revert to your lender’s standard variable rate (SVR). This is generally significantly higher than the best rates in the marketplace, and now research suggests four million mortgage holders are paying more than they need.

L&C research has revealed that homeowners on an SVR could save an average of £216 per month by remortgaging, equivalent to an annual saving of £2,590. However, 58%of those surveyed have never switched mortgage to save money. The research also found that 1.1 million households are wasting £2.78bn every year by sitting on the wrong mortgage deal, while 30% of respondents didn’t even know the current interest rate on their mortgage.

“It's worrying to see so many people still on a standard variable rate mortgage as they are not the cheapest rates available,” says David Hollingworth from L&C Mortgages. "Not only is there a lack of awareness around how much could be saved, but worse still, a huge number of people have never even tried to remortgage to get a better deal.

"With the cost of living on the rise and day-to-day expenses like energy prices soaring, it is hugely concerning to see that people are paying so much more than they should be. Our research shows that while homeowners believe they are paying too much for their mortgage, they still aren't taking action to cut their monthly payments… the chances are they could potentially save hundreds or even thousands of pounds a year by re-mortgaging to a new deal."

Mortgage holders could face the highest interest rate jump in eight years

The L&C data backs up other research by financial analysts Moneyfacts who revealed that mortgage holders approaching the end of their two-year deal could face the highest interest rate jump in eight years if they revert to their lender’s SVR. The average jump in interest rate for these borrowers will be 1.5%; however, if they remortgaged now they’d actually see their interest rate fall by an average of 0.73%.

As David Hollingworth concludes: "A mortgage is likely to be someone's biggest monthly outgoing, and in only a few easy steps they could get a better deal. It's crucial that homeowners regularly review their mortgage to see how their rate stacks up against the record low rates that alternative deals currently offer."