How much can you save by remortgaging? UK homeowners are wasting money on their lender's SVR

Could remortgaging save you thousands of pounds a year and ease lockdown hardship? Up to 800,000 UK homeowners ‘may not be on the best deal’
Daniel Lynch

As many as 800,000 UK homeowners could add the equivalent of seven weeks’ salary to their savings, simply by remortgaging their home.

People sitting on unfavourable standard variable rate (SVR) mortgages are wasting an average of £4,500 a year, which they could save if they remortgaged today — well worth the extra paperwork.

This amounts to a collective potential saving of £3.6 billion, according to online mortgage broker Trussle.

Government figures last week revealed that the number of people on payrolls fell by 600,000 between March and May this year as a result of coronavirus lockdown, with the population’s money worries only expected to worsen over the coming months. Any savings that can be made on housing costs will be a welcome addition to their rainy day fund.

Miles Robinson, head of mortgages at Trussle, said: “It’s clear that the reality of lockdown and the impact on the economy is hitting home for many, making planning for the future and effective saving more important than ever before.

“Hundreds of thousands of homeowners are collectively missing out on billions of pounds by sleepwalking on to an SVR, and it’s a problem we’re passionate to resolve, especially during these tough times. We’ve built a remortgage calculator to show homeowners how much they could save by finding a better deal.”

Most borrowers on an SVR will have slipped on to it when their fixed, tracker or discount mortgage deal ended and so can save what amounts to 15 per cent of the UK average pre-tax income of £30,420.

Due to higher local house prices, homeowners in London can make the biggest savings averaging £6,190 a year.

When shouldn't I remortgage?

Remortgaging is not always the best solution and may not save you money so it’s wise to do your sums if you only have a small remaining balance on your mortgage, or if you have to pay high fees for early repayment.

Even if you had no trouble getting a mortgage the first time around, if your circumstances have changed, you might struggle to get approved — for example, if you now have reduced income, additional childcare costs or have had issues with debt since you last remortgaged.

If your home has fallen in value since you last took out a mortgage it may also be hard to get a better rate.

Can I remortgage if I lose my job?

Robinson also points out that remortgaging is not a “fix-all solution” for homeowners who lose their jobs, for example once the furlough scheme ends.

Instead, Trussle advises checking your mortgage protection insurance plan to see what provisions may be available under that.

Homeowners may also consider a mortgage payment holiday, although it is worth remembering that this will add to the total mortgage balance and will increase monthly repayments.

A third option is to check if you are eligible for a product transfer with your existing lender, which could offer a lower interest rate and average monthly savings up to £326.