personal finance

'Situation starting to change for the better' – How homeowners could save over £10,000


According to the latest research from Moneyfacts.co.uk, competition appears to have re-emerged in the mortgage market over recent weeks. The money comparison website pointed out some fixed deals are now priced as low as 0.99 percent, while product volumes are increasing.

Meanwhile, borrowers who have automatically lapsed onto a Standard Variable Rate (SVR) mortgage could potentially save thousands of pounds by switching to a fixed deal.

It’s something which Rachel Springall, Finance Expert at Moneyfacts.co.uk highlighted this week.

“As a general rule, consumers would be wise to review their finances every six months or so, but with the impact of the pandemic it’s more essential than ever to keep a closer eye on whether someone has the right deal or even re-think any savings goal,” she said.

“As we wave goodbye to the first few months of 2021, now is an ideal time to check the latest mortgage and savings deals as consumers could find they are better off by switching.”

Ms Springall continued: “The motivation to switch from a standard variable rate (SVR) mortgage to a fixed rate may be obvious, but what is more evident over the past few months, is the peace of mind fixing for longer may offer.

“Despite a rise to the average two, five and 10-year fixed mortgage rate over the past few months, it is still worth considering a new fixed deal.

“The volatility of interest rates is a response to the pandemic, as the mortgage market contracted whilst lenders focused on their existing customers and less so on new business.

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“However, the situation appears to be starting to change for the better in recent weeks as both rate competition and product volumes are starting to return.”

Crunching the numbers, the finance expert explained tens of thousands of pounds could be saved.

“Borrowers sitting on an SVR who switch to a five-year fixed mortgage could save on average over £10,000 in the first five years of their mortgage term, however being able to move deals will depend on someone’s circumstances, such as whether they had been furloughed or have little disposable income to pay any associated fees,” she said.

These calculations are based on an outstanding mortgage balance of £200,000, over a 25-year term and an overall average five-year fixed rate of 2.81 percent, compared to the average SVR of 4.41 percent.

The saving is based on after the first five years of the mortgage term.

“The best deal will also depend on the overall package, so whilst there are some two-year fixed mortgages priced as low as 0.99 percent, they might not be the most attractive in terms of true cost, and borrowers would be wise to be wary of headline grabbing rates.

“Mortgage borrowing remains robust with the Bank of England highlighting the strongest figures seen since records began and this momentum may continue as normality returns and lenders launch new deals to entice new customers.”

According to Ms Springall, seeking expertise from a financial adviser could be worthwhile.

“As more choice returns to the market and attractive deals grab the spotlight, navigating the mortgage maze could be easier if consumers seek out independent financial advice and take away the potential stresses of applying direct and managing the process to completion.”

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Speaking about the savings market, Ms Springall added: “The past few months have not been kind to savings rates, but it is hoped some stability will return to the market as cuts become less prevalent.

“Indeed, in recent weeks, challenger banks have been injecting some competition back into the fixed bond market, which is great news for savers looking for a decent return and are happy to lock their cash away.

“Clearly there is appetite for deposits, but not all savers will be prepared to tie up their cash and should they be considering an easy access account, it’s safe to say that rates are not looking very enticing.

“The average rate on easy access accounts sits at an all-time low, but savers may still choose these vehicles due to their flexibility, particularly if they have been hit financially by the pandemic and wish to have their cash readily available to them.”





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