Homeowners who could have unknowingly lapsed onto a standard variable rate (SVR) mortgage are collectively paying £175m extra per month, research suggests.
More than one in 10 (12%) mortgage-holders have accidentally lapsed onto this deal, costing them £133.46 monthly, according to research by MoneySuperMarket.
With 11 million outstanding mortgages in the UK, this means about 1.3 million Brits could be paying more than they need to. SVR rates are about 15% more expensive than original mortgage deals.
But one in seven (15%) Brits don’t realise they will automatically be switched to this new rate once their initial deal ends, a survey of over 2,600 homeowners by MoneySuperMarket found.
This is especially true for first-time lenders. Those remortgaging for the first time are more than twice as likely, at 16%, to be unaware of how SVR rates work than those who have remortgaged before, at just 7%.
The research also found those who are still within their initial product period could save £28.36 a month — £340 a year — by switching to a better deal once their original deal ends.
For mortgage-holders on an SVR, potential savings rise to £133.46 a month — to £1,602 a year.
“Standard Variable Rates on mortgages are notoriously expensive and with 15% of those remortgaging being unaware of how they work, automatically lapsing onto them is a common and costly financial pitfall,” said Emma Harvey at MoneySuperMarket.
“Regardless of whether you’re on an SVR mortgage or another type, there could still be significant savings to be made when your initial mortgage deal comes to an end. In fact, we found that the average saving for mortgage holders still within their initial product period is £28.36 per month, which really adds up.
“In order to stay on top of how much you’re spending on your mortgage, be aware of when your current mortgage deal is due to come to an end and start researching rates several months in advance.
“You can arrange your new deal three months before the end date so that you switch over at the end of your initial term, ensuring you are always on the best deal.”