Data from the Financial Conduct Authority (FCA) on mortgage switching looked at the number of borrowers paying a reversion rate and how much they could save by refinancing.
It found that since 2016 when the regulator conducted its Mortgage Market Study (MMS), the number of people paying reversion rates on their mortgage had significantly fallen from 2.3 million.
Of the mortgages on reversion rates in the second half of last year, 150,000 were near term and 70,000 were in payment shortfall meaning they would be unable to refinance. There were also an additional 10,000 mortgages which were both near term and in payment shortfall.
Not all savings are the same
The number of mortgages that would have saved money through switching also declined since MMS. Of the 780,000 remaining mortgages on reversion rates, 370,000 would have saved money by switching while 190,000 were unlikely to. Compared to 2016 when the MMS was conducted, 800,000 borrowers could have saved money by switching.
Of the 370,000 mortgages which could benefit from refinancing, the FCA found an average saving of £1,240 a year could be made for two years by switching to a two-year fix with the borrower’s existing lender.
The FCA estimated that around 110,000 borrowers would save less than £500 a year for two years, while a further 110,000 would save between £500 to £1,000 a year. Some 150,000 would save more than £1,000 a year for two years by switching.
There were 220,000 mortgages that the regulator did not have sufficient information on to determine whether a saving would be made. This may be because they are on a closed book or the FCA does not have information on the property’s value.
This is lower than the 450,000 mortgages it was unable to assess as part of the MMS.
