Mortgage SVRs cost £750 a year

Sticking with your mortgage lender's standard variable rate (SVR) has meant thousands of customers have seen their mortgage repayments rise by £750 a year over the last few years.

Figures from online mortgage company Mform.co.uk show at the end of 2003 almost four million Britons were on their lender's SVR. Since then UK base rate has rocketed.

"SVRs with the major lenders are generally around two per cent above the Bank of England base rate," said Francis Ghiloni, Mform marketing and business development director.

"So, unless you need the flexibility offered through a SVR such as the overpayments that you can make it is unusual that you would choose a mortgage charging that rate and borrowers should be wary about remaining on them."

In 2003 the average SVR charged 4.19 per cent, by March this year it had risen to 6.15 per cent. Following May's interest rate hike it has risen higher still, with a string of major lenders charging more than 7.5 per cent.

This means the average mortgage holder staying on their SVR will have seen their repayments increase by more than £750 every year since 2003.

"With the Bank of England base rate expected to rise further, those mortgage holders paying SVRs should reconsider their position and decide whether they would be better off with a lower rate," said Mr Ghiloni.

"Fixed rates will suit many borrowers . . . However there is an argument that borrowers could benefit from variable rates if the Bank of England rate peaks at 5.75 per cent and then falls back. There may be some benefit in considering either a short-term fixed-rate or a low variable rate."