4th February 2015
Home owners can give themselves a £3,000-a-year cash boost by switching to a more competitive mortgage rate, new analysis has revealed
Borrowers could effectively give themselves a ‘pay rise’ by switching to better mortgage deal, according to Legal & General Mortgage Club.
A homeowner on the most competitive two fixed rate deals currently available could save £259 a month or £3,119.52 compared to someone who stays on a lenders’ Standard Variable Rate, it found.
The calculations are based on a mortgage of £165,000 at 75% loan-to-value over a 25-year term. The best two year fix currently available is 1.78% plus a £995 fee, while a representative SVR at the moment is 4.99%..
Even borrowers who are currently on fixed rate deals or other products with an early repayment charge (ERC) could potentially save money, although it is important to do the maths first.
L&G said that the average borrower could save £481.68 over two years even taking into account the ERC. These savings are based on the example of a borrower who took out the best five-year fixed rate three years ago and had to pay an ERC of £3,390.
The fall in inflation has made it seem unlikely we will see an increase in the Bank of England Base rate this year, said L&G. This has led many lenders to keep the interest rates they offer low, making now a good time for borrowers to check they are on the best deal for them.
Jeremy Duncombe, director, Legal & General Mortgage Club, said: “One of the best ways to save money is to review your mortgage.
“Chances are if your boss offered you £3,000 you would most likely accept and so contacting a broker to review your current mortgage arrangements could be the best thing you can do for your finances all year.”