As the fourth anniversary of the 0.5% Base Rate approaches on 4 March, figures from HSBC suggest borrowers who have been able to take advantage of low loan-to-value rates – 75% or less – have paid £4.2bn a year less in interest compared to those with a higher loan-to-value.
For a two-year mortgage on the average property, this is an annual interest saving of £1,012 per mortgage.
Meanwhile, homeowners in London have seen the biggest gain since the base rate moved to 0.5%, with property values rising by up to 54%.
Borrowers who opted for a fixed rate mortgage since March 2009 would collectively be at least £3.2bn worse off per year than if they had taken out a tracker rate as the base rate plummeted.
Homeowners who took out a five-year fixed rate mortgage in 2007 when the average rate was 5.83% have lost out the most.
The average customer would have paid £9,408 more in interest over the five year period than if they had taken out a tracker mortgage, average rates for which had fallen to 2.75% by 2011.
On the other hand, borrowers opting for a tracker mortgage have benefitted from the low base rate environment over the past four years, with 826,500 borrowers having collectively saved at least £1.26bn a year compared to fixed rate mortgage costs, an average saving of £1,510 in interest per mortgage per year.
Peter Dockar, head of mortgages at HSBC, said: “The low Base Rate period has been a tough economic environment, but borrowers have benefitted substantially over the last four years.
“Some of these winners have gained from already owning property in the right area, or already having sizeable equity in their home which has given them access to low LTV mortgage rates
“With mortgage rates now at record lows, now is the time for borrowers to review their finances as many may be able to make significant savings by accessing competitive deals on their home loans.”
