The average Standard Variable Rate (SVR) rose from 4.72% in August to 4.85% in September following the Bank of England base rate increase, according to figures from Moneyfacts.
It found that the 2.41% difference between the current average SVR and the average two-year fixed mortgage rate two years ago (2.44%) was the highest in a decade.
Charlotte Nelson, finance expert at Moneyfacts, said this showed the significant impact the 0.25% jump in base rate had on the mortgage market just one month on and noted this would prove a powerful incentive.
She added: “A year ago, when the variance stood at 1.88%, borrowers reaching the end of their fixed deal would perhaps not have reacted as quickly as they may do today when approaching an SVR.
“It is easy to see why borrowers are more likely to remortgage today, as they could find that their monthly repayments increase by £260.57 per month or £3,126.79 per year on average if they opt to settle for the SVR.”
Difficult to lower rates
Nelson said it was likely many borrowers had pre-empted the base rate rise and already remortgaged to another fixed deal, boosting remortgage activity, with the number of remortgage advances in June 2018 growing 8.4% year-on-year.
“The extra motivation is only going to boost this remortgage trend further,” she continued
“The increased benefit to be gained by switching deals mean providers will need to remain competitive or face losing a substantial chunk of their mortgage book. However, as it is becoming increasingly difficult for lenders to lower rates, they may look at other aspects of the mortgage package to attract remortgaging customers, such as fees and incentives.
“Faced with such a hefty increase in monthly repayments, it clearly pays for borrowers to shop around and remortgage. However, they must consider all aspects of the mortgage to ensure they are getting the best deal for them,” Nelson added.