2.5 million UK home buyers pay too much for their mortgage

21 Sep, 2017

13 Sept 2017

New analysis of the mortgage market by Tesco Bank reveals that up to 2.5 million UK home buyers may be over-paying on their mortgage as a result of slipping onto higher Standard Variable Rates (SVRs) at the end of their fixed rate period. With the typical SVR at 4.39% compared to the average 2 year fixed rate at 1.95%, these customers could be over-paying on their mortgage by up to £274 a month. To help customers manage their money, Tesco Bank automatically offers existing customers access to the Bank’s competitive rates 12 weeks before the end of the fixed rate term.

Why does this matter?

Tesco Bank’s new Home Buyers research reveals that one-third of home buyers would need to reduce their discretionary spending should interest rates increase by 0.25% – equivalent to £21 per month on an average mortgage balance.

Furthermore, the research reveals that while 62% of prospective home buyers are optimistic about their housing prospects – a reduction of 11% over the past 6 months – a third of prospective home buyers are more pessimistic, citing economic uncertainty, budgetary pressure, and the prospect of future interest rises as key concerns around purchasing their first home or moving house.  

David McCreadie, Managing Director, Tesco Bank said:

“Our goal is to reward the loyalty of our customers. Our latest home buyers research illustrates that customers continue to face many challenges when buying a home and so we give them a little help by offering our competitive rates when their fixed rate term comes to an end.

“Alongside our competitive mortgage rates, we are also launching a series of guides to help customers navigate some of the potential bumps in the road as they move into their new home – especially those who are moving home for the first time.”