Strongest incentive to remortgage in over a decade
The difference between a fixed two-year mortgage rate and today’s Standard Variable Rate (SVR) is the highest it has ever been for 11 years.
Moneyfacts reports that mortgage holders who took out a two-year fixed rate mortgage in 2017 which is now reverting to the SVR will find themselves paying more than double their previous interest rate.
Mortgage interest rates were being locked in for two years at 2.31% in January 2017. Calculating on an average SVR of 4.9% now, in January 2019, Moneyfacts says that’s a hefty an increase of 2.59%.
Borrowers who let their mortgage revert to the SVR at the end of their fixed-rate period will find their monthly mortgage payments jump by nearly £280 a month (on a 25-year £200,000 mortgage). That could add up to a hefty £3,352 over a year.
Remortgaging at a current average two-year fixed rate of 2.53% (according to Moneyfacts) would decrease those new payments by nearly £260 a month, taking over £3,000 off that annual increase.
Borrowers who shop around will find even lower rates currently for a new two-year fixed mortgage: from 1.72%. Which could mean an actual decrease on what you’ve been used to paying for monthly for your mortgage payments .
As with most fixed deals, there will be penalty charges if you want to pay off your mortgage before the end of the two-year period. But the benefits of avoiding the SVR are stronger than than they’ve ever been.