Just one in four mortgage-paying homeowners understand how cuts to the Bank of England’s (BoE) base rate could affect their mortgage payments, according to new research from Trussle, the UK’s first online mortgage broker.
In August 2016, the BoE made the first adjustment to the rate in over seven years, cutting it from 0.5% to 0.25%, and mortgage rates soon fell as a result. Tracker rates dropped by 0.25% in line with the BoE’s action, while fixed rates also hit record lows, with two-year fixed rates available for as little as 1.39%.
However lender SVRs, the ‘default’ rates that borrowers often find themselves on as soon as an initial rate has ended, did not drop nearly as far. The average SVR before August’s base rate change was 4.8%, but by November had fallen only 0.17% to 4.63%.
Borrowers could save £3,500 a year by remortgaging
As a result of the widening gap between the best and worst rates on the market, people stuck on expensive Standard Variable Rates (SVRs) could now save a further £380 per year by switching to a market leading fixed rate. What had been an average annual saving of £3,120 has grown to £3,500, as a result of August’s base rate cut.
Just over one in 20 have considered switching mortgage
In the study, borrowers were also asked if they were happy with their mortgage. Only a third (36%) of borrowers said they were content with what they were paying in the current environment of rock-bottom mortgage rates. This could be explained by the one in three borrowers currently on an SVR. Despite the high proportion of people unhappy with their mortgage, just over one in 20 borrowers have considered switching to a better rate since the Bank of England cut the base rate to 0.25% in August. When asked what had ever stopped them from switching, 20% said the process would be too much hassle, while 14% said that it all seemed too complicated.
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