Moneyfacts UK Mortgage Trends Treasury Report data, not yet published, highlights that borrowers who took out a two-year fixed rate mortgage will have less incentive to switch from their Standard Variable Rate (SVR) to a new deal. The graph shows the difference between the two rates, which is the lowest it has been for six months. The following graph shows whether the average borrower’s interest rate increased or decreased when reverting to an SVR on maturity of a two-year fixed rate mortgage.
Charlotte Nelson, Finance Expert at Moneyfacts, said: “This month, the margin between the average mortgage rate of two years ago (3.54%) and the current standard variable rate (4.71%) has reduced considerably, with the current variance of 1.17% indicating that borrowers may have far less motivation to remortgage now than they would have in recent months.
“This shows the significant effect the cut to base rate has had on the mortgage market, as in just four months this margin has shrunk by 0.17%. A short time ago, borrowers would have given a remortgage some serious thought, but they may now consider simply reverting to the provider’s lower SVR instead.
“This could provide a strong indication that the remortgage market may start to show a further slowdown in activity, and strengthens suggestions that the current uncertainties are making homeowners wary of making any big decisions.
“An increase in borrowers tempted to remain on their SVR could potentially unnerve providers. With rates at all-time lows, it may be difficult for some providers to find room to lower rates even further and try to retain their mortgage book by encouraging customers to commit to a remortgage with a longer initial rate period. However, this may cause providers to look at diversifying into different areas of the mortgage market instead, such as higher loan-to-values.
“With fixed rates now at record lows, borrowers could find they are potentially missing out on savings of hundreds of pounds. It is always worth taking a look to see if a better deal could be achieved.”
The Moneyfacts UK Mortgage Trends Treasury Report, out later this month, provides an in depth monthly review of today’s changing mortgage trends, including all the relevant facts on the UK’s residential and buy-to-let markets.