"This costs UK homeowners an alarming £10 billion a year in interest payments."
The research compared average SVRs and two-year-fixed rates from 76 lenders over a six-month period. It revealed that borrowers with Lloyds, Nationwide, Santander, RBS, Barclays, and HSBC, which collectively serve 69% of the market, would see their monthly interest rate jump by an average of 2.5% when automatically transferred from a leading two-year fixed rate to an SVR at the end of their fixed period.
Of the three million households currently on a lender’s SVR, around one million are ‘mortgage prisoners’, however, close to two million people on SVRs could switch immediately. This group constitutes 18% of the mortgage borrowing population, and they are collectively overpaying lenders by £9.8 billion in interest payments every year.
The research found that one of the main reasons so many people languish on SVRs is due to lack of awareness among borrowers. A staggering two thirds (65%) of UK mortgage holders don’t know that a lender’s SVR is typically worse value than a fixed rate, while one in four (24%) have no idea what ‘SVR’ even stands for.
Equally alarming, almost half (48%) of UK mortgage holders don’t know when their fixed rate period comes to an end. Delaying remortgaging by just a month would cost £272.50 for a borrower at one of the UK’s top six lenders.
Ishaan Malhi, CEO and founder of Trussle, said: “The results of this inaugural Mortgage Saver Review highlight the need for the mortgage sector to better educate borrowers and simplify a raft of unfair practices. Borrowers are being put at a huge disadvantage by not understanding the implications of lapsing onto their lender’s Standard Variable Rate. This costs UK homeowners an alarming £10 billion a year in interest payments.
“The industry, its regulators, and the UK government can address these challenges by working together. Potential solutions could be to agree a reasonable upper limit on SVRs, and a system where lenders are not only obliged to warn their mortgage customers well in advance of their fixed rate coming to an end, but also to confirm receipt of this notification.”
