One in five mortgage customers are paying through the nose for sitting on their lender's standard variable rates.
Most UK lenders have now reduced their standard variable rates (SVRs) for mortgage customers by 0.25%. This is in response to the Bank of England's base rate reduction which took place in August.
However, industry insight from independent comparison website money.co.uk reveals that almost two million mortgage holders are sitting on these standard rates, paying up to 5.99% APR a year in interest. With the market-leading two year fixed rate mortgage charging less than a quarter of this at 0.99% APR⁴, switching to this deal could save £3,395 in the first year alone — a whopping £283⁴ a month.
Over the term of the two-year mortgage deal, this is total saving of £6,790 including fees.
For those that are more comfortable on a longer-term fixed rate deal, such as five years, the savings made by moving are still significant. For people that are on an SVR of 4.74% APR, moving to a market-leading five-year fixed rate mortgage deal at just 1.98% APR5 will save £2,5816 in year one, or £12,905 over the full five-year term.
Each month, this equates to £215, which could be used to overpay your mortgage and clear the debt quicker, or be put back in the pot for other household bills and expenses.
Commenting on the findings, Hannah Maundrell, Editor in Chief of money.co.uk, said
"It's no surprise that the amount you could save by switching is so eye watering - after all, your mortgage is generally the biggest monthly bill you pay. Mortgage rates are currently at rock bottom, so anyone sitting on their lenders' standard variable rate (SVR) is almost certainly paying a lot more than they should be.
"Just because you're not moving house, you don't have to stick with the same mortgage you had when you bought it, or even the same lender. If you've been in your home more than a couple of years and haven't switched mortgage since you moved in, there is a high chance you are on your lender's SVR and could save a bundle by shifting.
"It's worth checking because the savings could make a significant impact on your life. It could mean a new car, an extra holiday, overpaying your existing mortgage, being able to save or paying down debts that are keeping you awake at night.
"If you are worried about bad credit and think switching isn't an option for you, don't write it off until you've spoken to a broker as you may have some options. The key thing is to check your rate and your monthly payments and work out if you can save yourself some money by switching to a cheaper deal."
Notes to editors: 1. Newcastle Building Society's 5.99% APR is the highest SVR for residential mortgage customers; correct as at 28th September 2016.
2. This is based on the standard variable rates of the UKs top ten mortgage lenders by market share which range from 3.69% APR with HSBC Bank up to 4.74% APR with Yorkshire Building Society. These ten mortgage providers hold a total market share of 82.2% — source CML.
3. According to the CML there are 11.1 million mortgage holders in the UK, 18% of which are paying their providers standard variable rate (SVR). This totals 1,998,000 UK mortgage holders.
4. Table one - all data and information in this table is correct as at 28th September 2016, all calculations include fees and charges. These are the top ten mortgage providers by market share totalling 82.2% — source CML.
5. Yorkshire Building Society offer a five year fixed rate deal at just 1.98% APR.
6. All savings calculations are based on money.co.uk industry analysis and analyst calculations.