You are here: Home - News -

Borrowers pay £2,536 extra a year for sitting on SVRs – research

by:
  • 12/09/2018
  • 0
Borrowers pay £2,536 extra a year for sitting on SVRs – research
Homeowners who lapse onto their lender’s Standard Variable Rate (SVR) are being stung with over £2,500 a year in extra interest, analysis has shown.

 

An average homeowner slipping on to their lenders’ SVR faced an extra £2,536 a year in interest payments, equating to £211 a month, compared to the provider’s best two-year fix, according to analysis from online mortgage broker Trussle carried out in August.

Across the UK there are 2m borrowers currently on an SVR, who could collectively save £5bn a year by switching, the broker said.

The study looked at 16 UK lenders, and analysed the jump in interest charges from each provider’s best two-year fixed rate deal to their associated SVR.

Of the chosen lenders, there were huge differences between fixed rates and SVRs.

At Leeds Building Society the gap was £4,152 a year.

The smallest difference was found at Metro Bank, which charged customers an additional £164 a month, or £1,966 a year when they move onto its SVR from the best two-year deal.

One reason why a borrower may lapse onto an SVR is that they were not aware that it was time to switch until it was too late.

In Trussle’s survey of 2,000 mortgage borrowers, one in five said they could not remember the last time their provider contacted them about their mortgage.

Almost twice as many stated that their lender or broker doesn’t do enough to keep them updated.

In addition, half did not understand terms included in letters they receive from their lender.

A quarter ignored these terms and only read the remaining parts, while 16% stopped reading completely when they reached a section they didn’t understand.

Ishaan Malhi, CEO and founder of Trussle, said that homeowners are being penalised for loyalty and collectively overpaying on interest by billions of pounds every year.

He added: “While lenders are improving the way in which they communicate with customers, more needs to be done to reduce the vast number of people on SVRs.

“As part of our call for a Mortgage Switch Guarantee, a set of proposals we hope will improve the switching process, we are asking that a mandatory letter is sent from lenders to borrowers exactly three months before the end of the initial term, which must be accompanied by electric communication to ensure it’s not missed.”

There are 0 Comment(s)

You may also be interested in

Business Skills

In this section, we offer short ‘how to’ guides on harder to crack areas of business. From social media, to regulation or niche product areas, we cover it all.

Profiles

Our journalists interview key industry entrepreneurs, strategists and commentators for day-to-day market insight and a strategic view of where the industry is heading. We offer lessons for success and explore the opportunities for your business

Success in Practice

Here, we share case studies fleshing out best practice to help you decide what could work for your business. Take a look at how others approached complex tasks like launching a new mortgage lender, advising on a new product area or deciding to specialise in another. Learn from others mistakes and triumphs.

Marketwatch

Each week, we ask top mortgage and property commentators with a unique perspective to examine a key news headline, market move or regulatory or political issue.

Poll

Vote in our weekly poll here. It’s your chance to tell us what you think and be heard on the top news stories of the week. Review our archive to find out what your industry really thinks and all our coverage of the results.

Top Comments

Be part of the conversation on Mortgage Solutions. We want to hear from you. We have a tool called Disqus to tell us which stories get the most comments each week. Every Friday, the team picks the most thoughtful or opinionated contributions from our readers to enjoy again. Don’t forget to share your favourite stories from the site on social media to keep the conversation going.
Read previous post:
Broker firm sees 95% of FOS complaints upheld as mortgage cases soar

Broker firm The Mortgage Matters Partnership saw 95% of complaints against it upheld in the first half of the year...

Close