Homeowners whose mortgage deal is due to end in the next three months are being warned to act now due to coronavirus delays. Otherwise, they could end up rolling onto their lender’s standard variable rate (SVR) and see bills rocket. But why is this?
When you take out a mortgage, you will automatically be offered a deal by your mortgage broker or lender. This may be a fixed-rate or a tracker which lasts for two, five or even ten years or more and will have a reasonable rate attached.
When the deal ends you have two options. You can either remortgage or ‘switch’ to a new mortgage deal, a move which could see you sign up to a product which either rivals or betters the current rate you are on.
Alternatively you can do nothing. This option has one advantage in that you literally don’t have a lift a finger. There’s no need to shop for a new mortgage, speak to a broker or go through the remortgage process.
But there is a major disadvantage too in that you will probably end up paying a lot more money each month. This is because if you don’t switch your mortgage your lender will automatically move it for you – to its very own standard variable rate (SVR). This is often a lot more expensive than your current deal and will almost certainly cost you more than any other new mortgages available on the market .
Absolutely. Recent UK statistics show in most cases a lender’s SVR – also known as a reversion rate – was typically somewhere between 4.24% and 4.99%.
So, someone who had been paying a mortgage rate of between 1.89% and 2.29% during their introductory fixed-term could see their monthly payments increase by one third if they moved to the SVR.
As well as using a whole-of-market broker like us to help you navigate the broad marketplace, you can also ensure you bag the best rate by getting yourself ‘mortgage-ready’ before you switch. Here are some of Just 4 Mortgages top tips to help you get prepared for a remortgage:
If you live in Nottinghamshire you can benefit from a free initial telephone consultation with our team at Just 4 Mortgages. We will talk through your remortgaging options and advise you on the next steps.