Thousands of borrowers could shave £218 from their mortgage each month | Personal Finance | Finance

Hundreds of thousands of homeowners are paying between 7.58% and 8% interest on their mortage a year when they could be paying just 5%. The Bank of England slashed rates last week to 4.25%, but TotallyMoney’s research found lenders’ standard variable rates (SVRs) were still charging much more.

TotallyMoney said 6%, or 540,000 of homeowners are currently on their bank’s SVR, with lenders charging between 7.58% and 8%.

TotallyMoney said with 1.6 million fixed-rate deals set to expire in 2025 even more borrowers – an average of 4,384 per day – could find themselves paying more than they should.

This is because unless these borrowers switch to a fixed-rate deal they will automatically default to their lenders’ SVR.

The average homeowner coming off the March 2020 5-year fixed rate of 2.74% could see their monthly payments jump from £814 to £1,219, or an extra £4,860 per year, when moving on to today’s average SVR.

Based on the average UK house price in 2020 (£235,637) with a 75% LTV, repayments would have been £814 over the past five years.

These will jump to £1,007 per month if they move onto the current average 2-year deal of 5.18%, £1,001 per month on the average 5-year deal at 5.10%, or £1,219 on the current average SVR (7.58%).

Alastair Douglas, chief executive of TotallyMoney said some borrowers who changed to a fixed rate from an SVR could save £218 a month based on these average rates.

Douglas urged homeowners, to open up their banking apps or dig through bank statements to find out when their existing deal is ending.

“And remember, you won’t need to wait for the end date before locking in your next offer, as you can often do it up to six months in advance, helping you to avoid the dreaded standard variable rate.

“You should also take some time to check your credit report, and to make sure that everything is correct and up to date. Any decent, free personal finance app should give you a personalised plan to help you improve your score and access the best offers for your personal circumstances.

“If you find yourself struggling to keep up, then contact your provider as soon as possible. The government has told lenders to support borrowers, and to offer them personalised solutions to help them manage their finances. That way you might avoid missed payments and damaging your credit file, or in the worst case, having your home reposessed.”

The table below highlights the SVRs currently set by some of the UKs biggest high street lenders.