Remortgaging could save the UK £12bn

Remortgaging to a cheaper deal could save homeowners in the UK £12 billion over two years.

That is the finding of price comparison website moneysupermarket.com, in a new study released today.

Overall the website reveals that one lender in two charges a standard mortgage rate more than two per cent higher than the basic rate of borrowing in the UK.

"It is incredible that over half of all mortgage lenders are charging borrowers a full two per cent more on their SVR [standard variable rate] than the current base rate,” said Louise Cuming, head of mortgages at moneysupermarket.

“Lenders rely on borrower apathy, enticing them in with competitive introductory deals and relying on them to stay put once the deal is over. I urge the quarter of borrowers who are paying the SVR to consider remortgaging to one of hundreds of competitive deals on the wider market or face wasting thousands of pounds in interest over the next year alone."

A borrower on an SVR of 6.5 per cent could save a massive £4,560 in just two years by moving to a market-leading fixed-rate mortgage, moneysupermarket calculates.

With almost one mortgage holder in four paying their lender’s standard variable rate, this means between them Britons could save a massive £12 billion in two years.

And even the supposed benefits of a variable rate are not being passed on by all lenders.

While the Bank of England cut the cost of borrowing earlier this month, 48 per cent of lenders are yet to reduce their SVR, moneysupermarket reveals.

"Lenders are relying on the lethargy of their customers because they want them to stay on the high SVR. Also, more than half of lenders are enforcing sneaky delay tactics by still not passing on a rate cut to its existing customers, two weeks after the Bank of England reduction,” Ms Cuming noted.

“While some lenders have extortionate SVR rates of over seven per cent, shifting it in line with a base rate cut is not expecting too much.”

But she also had a warning for those shifting mortgages.

"If you are thinking of remortgaging to a better deal, make sure you are fully aware of any hidden costs, such as arrangement fees and exit fees. You may make a huge saving by remortgaging but you don’t want those effects negated with additional costs," she concluded.