- Switching from a standard variable rate (SVR) to a five-year fixed rate mortgage could reduce monthly repayments for UK homeowners by up to £330 per month
- According to the latest figures from Moneyfacts, the average SVR is currently 8.16% while the average rate on a two-year and five-year fixed rate mortgage is 5.77% and 5.38% respectively
- SVR rates have risen from 7.85% in August 24 up to 8.16% in August 24, an increase of 0.31%.
- Bank of England figures show mortgage repayments are set to increase by around £180 each month for millions of homeowners coming off fixed rates of less than 3%
As the Bank of England recently cut the base rate from 5.25% to 5%, new analysis by Compare the Market has found that homeowners on a standard variable rate (SVR) mortgage could save up to £330 a month by switching to a fixed rate deal, the equivalent of £3,960 a year.
As interest rates have started falling following the Bank of England decision, homeowners may be able to save more by shopping around for mortgage deals, rather than opting for an SVR deal when their initial mortgage term comes to an end.
Switching from the current average SVR (8.16%) to the average five-year fixed mortgage rate (5.38%) could result in up to £3,960 in savings per year. Similarly, switching from the current average SVR rate to the average two-year fixed rate (5.77%) could save homeowners up to £3,432 annually on their mortgage repayments.
Homeowners who are either coming to the end of their initial fixed rate or are already on a SVR might wish to consider what their options may be to get the right deal for their circumstances. The Bank of England’s Financial Stability Report shows more than three million people are still paying rates of less than 3%. However, most of these fixed rate deals are set to expire between now and the end of 2026. As these homeowners roll off their fixed rate deals during this time, their mortgage repayments are set to increase by around £180 each month, equivalent to 28%.
Tom Lyon, Money Expert at Compare the Market, comments: “Households will welcome falling mortgage rates after the recent Bank of England decision. However, fixed rates remain high by historical standards, and borrowers who locked in low rates years ago could face substantially higher mortgage costs if their previous deal expires soon.
For any homeowners coming off a mortgage deal, it’s worthwhile shopping around online and seeing what other fixed rate deals are available, as this could potentially save thousands in annual repayments compared to going onto an SVR. It’s a good idea also for homeowners to keep a close eye on how the market continues to evolve so as to be as informed and confident as possible in their financial decisions.”
