Pay less on your mortgage!

Mortgage borrowers paying their lender’s expensive standard variable rate could be paying a third less if they switched to a low cost fixed rate deal at under two per cent.

According to Yorkshire Building Society, twice as many homeowners are looking to move to a cheaper loan than this time last year. Demand is being driven by bargain fixed rate deals.

Rachel Springall, of financial product scrutineer Moneyfacts, says: ‘These low fixed rates will not be around forever’.

On a £150,000 repayment mortgage over 25 years, the monthly payment would be £855 for someone on a 4.75 per cent standard variable rate. But switch to a 2 year fixed rate, typically 1.59% (depending on the loan to value), and the monthly payment would fall to £606 – saving £249 per month or £2,988 a year.

The savings would be greater if the variable rate pushes higher this year, in response to an increase in the Bank of England base rate.

Borrowers who took out cheap two-year fixes in late 2013 should act to avoid seeing their repayments spiral.

According to Moneyfacts, borrowers on two-year fixes with Halifax, HSBC, Post Office Money, Tesco and West Bromwich Building Society are among those who should now dig out their statements.

Borrowers, whose fixed rate deal is coming to an end, will find the market has changed since they took out their loans.

There are plenty of low cost deals available but there is now stricter questioning on mortgage affordability and queries about income and outgoings, including a stress test on an applicant’s ability to repay a loan. Typically, a lender wants to know if a borrower can afford their repayments if interest rates were to rise by three percentage points.

To find out whether you could be better off by switching to a fixed rate deal, please call us and we will be happy to advise.