2020 was a very rocky year for the mortgage market with stricter lender criteria, the withdrawal of high loan-to-value mortgage products and customers generally feeling the financial pinch due to lockdown and furlough. Now mortgage product availability has improved and the UK continues to follow its roadmap out of lockdown, customers should take the time to review their finances, rather than resign themselves to remaining on their lender’s Standard Variable Rate.
COVID concerns deterring borrowers from saving money
According to recent research from Legal & General, one in three (32%) of UK borrowers were considering reverting to their lender’s Standard Variable Rate (SVR) when their current two or five-year fixed rate mortgage deals expire.
The main reason for not exploring their remortgage options (and potentially making significant savings on their monthly repayments) was the belief that the adverse financial impact of COVID would leave them ineligible for new deals.
- Over half of UK borrowers (52%) who have seen their income decline due to COVID are worried that lenders will scrutinise their finances in more depth compared to pre-pandemic figures.
- One in two (50%) are concerned that their decision to take a payment ‘holiday’ will affect their future mortgage options.
- Two thirds (67%) believe it will be harder to remortgage when furloughed.
Understandably those who have experienced financial loss as a result of COVID may feel less confident in their ability to remortgage, instead falsely believing the lender’s SVR is the only option open to them. The research suggests that these assumptions could impact over 700,000 borrowers reaching the end of their two and five-year fixed rate mortgages in 2021, potentially increasing their annual mortgage repayments by more than £2,500.
There are other options to being an SVR prisoner
If you choose not to remortgage to a new deal then a Standard Variable Rate mortgage is what you’ll be transferred on to when your current fixed deal comes to an end. You will be charged this default interest rate set by your lender which in the majority of cases is higher than the rates of other types of mortgage. According to Moneyfacts the average SVR is 4.41% vs. a typical 2 year fixed rate of 2.57%. With a difference in average rates of 1.84% there are clearly significant savings to be made by remortgaging.
Whatever your circumstances, it is essential that customers nearing the end of their initial fixed rate period take action and review their remortgage options to avoid overpaying on their lender’s Standard Variable Rate. Countrywide Mortgage Services can compare 100s of remortgage deals from a wide range of lenders to find the best deal to suit you. The pandemic has affected us all and we are equipped to fully review your mortgage and place you with an appropriate lender – many of which offer furlough-friendly options and some specialist lenders who can help with complex cases.
Remember, attractive low rates aren’t the only thing to consider when searching for the ‘cheapest deal’. You need to look at the overall cost of the mortgage product, factoring in additional fees, lender criteria and the length of time (mortgage term) you wish to borrow for. A Countrywide Mortgage Services consultant can help you understand these overall costs and find the best deal for your individual circumstances.
You’re not limited to your existing lender’s range of products
If you do decide to review your remortgage options then good for you! However, don’t be fooled in to thinking you must stay with your existing lender, whether that is on their Standard Variable Rate or their selection of new two or five-year fixed rates.
Legal & General’s report highlighted that among those who don’t plan to revert to their lender’s SVR, over half (52%) say they are likely to stick with their current lender when looking for a new deal (a third of which believing it was the easiest way to secure a new mortgage).
Again, this isn’t necessarily the case. A Countrywide Mortgage Services Consultant can compare 100s of options tailored towards your circumstances, including (in most cases) the products offered by your existing lender as well as a review of your protection and insurance too. So, more choice, better comparisons, potential savings and no obligation to proceed – all from the comfort of your own home.
Don’t let COVID hit your bank balance further – review your options today.