Is It Time To Switch From A Standard Variable Rate Loan? November 24th, 2009
Over the course of the past year or so, the number of borrowers looking for a remortgage on their home owner loan or mortgage has fallen significantly, as more and more people are finding that it is cheaper to keep their loan with their existing lender on their standard variable rate.
Despite the bank of England base rate of interest remaining incredibly low for the majority of this year and looking as though it will continue to stay at low levels, standard variable rate (SVR) loan rates have not dropped in the same way, in fact the margin between SVR’s and base rate has widened to an average of 4.2 per cent, compared with just 2.68 per cent twelve months ago.
The research comes from moneysupermarket.com, who claim that many people with home owner loans are becoming complacent about their existing lender’s SVR and not bothering to even look for a better deal on their loan. As a large number of lenders continue to steadily increase the margins on their standard variable rate loan deals, now could be the time for home owners to start looking for a better deal and maybe find a cheaper loan.
Hannah-Mercedes Skenfield of moneysupermarket.com said “Borrowers should be aware that lenders are free to price their SVR as they please and therefore an SVR deal may not be the best way to get the benefit from the low base rate environment. For those who have built up at least 20 per cent equity in their home, it is likely that you will be able to find a better rate on a three year fixed deal, at which point the only real drawback from fixing is the arrangement fee, which can be anything from around £1,000 to nothing at all.”