More than a quarter of mortgage holders are on their lender’s standard variable rate (SVR), according to research from Habito.
A November survey of 2,000 mortgage holders found 27 per cent were on an SVR, and one in 10 who knew they were on an SVR but had not switched said it was because they did not realise they could get a cheaper deal.
About half (54 per cent) rightly identified that remortgaging was typically done to switch to a more competitive rate.
Habito warned that homeowners most in need of saving on costs were potentially holding back from getting a better deal, as 11 per cent were concerned about lenders scrutinising their finances amid the current economic climate.
Daniel Hegarty, founder and CEO of Habito, said many homeowners admitted they were “in the dark” on remortgaging.
He added that with the likelihood of another year of uncertainty ahead, it was “more important than ever” to ensure homeowners were not paying “over the odds” on their mortgage.
Homeowners could save up to £4,080 per year by moving off an SVR, according to Habito.
Analysis by the broker of the six largest high street lenders found the average lowest two-year fixed rate was 1.26 per cent, compared to the average SVR of 3.53 per cent from the top six lenders.
Habito calculated that switching between the SVR and best rate available could net a saving of £4,080 over a two-year period.
Its survey also found that one in 10 believed that moving on to an SVR would help them pay off more of their mortgage balance quicker.
Sam Cattell, founder and mortgage adviser at Mindful Mortgages, said lenders could be doing more to explain this to their clients.
Ms Cattell also said: “As well as reviewing the interest rate, it’s a great opportunity to consider everything else and potentially look at other changes like reducing the term, making overpayments or changing the type of mortgage to something more suitable, like an offset for example.”
Bank of England statistics showed there were 35,100 approvals for remortgaging with a different lender in November, around 33 per cent lower than in February 2020.
chloe.cheung@ft.com
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