Each year the mortgage firms have made straightforward cash from the millions of borrowers whose mortgage deal comes to its natural end and who then decide to make a switch. The shopers have had tracker mortgages, or fixed rate deals for a few years, and they find a better deal for themselves.
Lenders have also enjoyed this steady income stream as re-mortgages typically have a low loan to value ratio and are low risk.
People don't see any advantage in making a change, and if this trend continues lenders won't see an increasese in their lending levels for the obvious future.
When your mortgage deal comes to the end of a standard rate, it immediately goes back to the standard variable rate ( SVR ) your lender uses. This was pricey before and ccustomers looked around for better deals on offer elsewhere.
Now SVRs have fallen to exceptional levels thanks to the UK Central Bank's four fast cuts in their base rate and lenders have been encourageed to pass the cuts on to their ccustomers. The average SVR is now 4.99 per cent.
The upshot is that reverting to your lender's SVR is usually less expensive than getting a new deal, so re-mortgaging is not as appealing a choice as in the past.
Money facts states the average tracker rate is 4.11 per cent, slightly lower that the average SVR, while a two-year fixed rate could be a bit higher at 5.05 per cent.
The cost of switching needs to be considered too.
Also, there are no early repayment charges to find.
If yours is a high loan-to-value ( LTV ) re- mortgage, that is one where you own little equity in your house, it's even more reasonable to stay with your lender and revert to their SVR.
A lender will regard you a higher risk if you have little equity in your home. And they will charge you more appropriately. So although the average SVR is 4.99 per cent, if you only had ten percent equity, you might pay 6.29 % for a 2 year fixed rate. You would not even be eligible for a 2 year tracker rate.
On a 150,000 pound mortgage this would cost 993 pounds a month. Or if your lender had a lower SVR of 3.5 % you would get away with a once a month payment of 751 pounds, saving 5,808 pounds over two years.
If you have twenty-five % or more equity in your property it could be worth looking around for a better deal.
You can find more help and advice on my blog by clicking the link below-
Cheap fixed rate mortgage
