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FRIDAY FEATURE: When rates are low, why are so many people on SVR?

This month, Independent Mortgage Adviser, Chris, looks at unraveling the mystery about why so many people remain on an SVR when mortgage rates are so low. Read more, including this month’s BEST RATES, here.

This does not constitute advice and advice should be sought in all instances before acting on it.  Your home may be repossessed if you do not keep up repayments on your mortgage or any other debt secured on it. 

Why are people more adverse to switching mortgage?

According to the Council for Mortgage Lenders, the amount of people switching mortgage lenders has dropped drastically in the last decade. Ten years ago, on average a million borrowers switched lenders to obtain better rates on their mortgage. In 2016, the volume of “switchers” was around 384,000.

There has been an increase in remortgaging again in the last year. Looking at figures from March 2017, there were broadly 35,000 cases where a homeowner transferred their mortgage to a new lender, compared to 28,700 in March of 2016.

This represents a 24% increase, however remortgages in March of 2007 are reported at 97,600, almost three times the current levels. In March 2003, records show remortgages to be 124,000+.

Rates however, are so low and the fact that significant savings can be made by switching to a new product, does beg the question as to why so many people are still on a Standard Variable Rate (SVR). 

What is the appeal with SVR? Or are people just too lazy to take action?

Data company CACI report that 3 million UK homeowners are on their lender’s SVR. Their loans combined total £246 billion. In addition, over £120 billion of mortgage value will convert onto an SVR in the last six months of 2017, according to Virgin Money.

The SVR in June 2017 averaged 4.23%. With the lowest mortgage rates below 1% now, what is keeping people on SVRs? 

A number of reasons include:

Not enough equity in their property

It is true, most of the super low-rate products do require a reasonable deposit so this does cut out a proportion of the market.

However, even though the sub-1% rates may not be attainable, the sub-2% rates could well be, also relevant for first time buyers.

Check latest mortgage deals for homeowners with a small deposit.

Not able to pass new affordability tests 

The Mortgage Market Review introduced a few years ago meant that homeowners have to demonstrate affordability on their home finance. This has unfortunately left many borrowers “mortgage prisoners” as even though they have wealth in their property, their income multiples don’t stack up sufficiently to be able to obtain a better mortgage. Or at least, so they think.

This is a very real issue for some homeowners, however other borrowers are led to believe, by their lender, that they wouldn’t be able to get a new mortgage, when in fact they could.

With the high competition levels between lenders, and the choice of mortgage products available, there is in most cases some way can be taken to save money.


Still the most common reason for being on an SVR is inertia. A lack of time or effort to source a new deal, or to even get the ball rolling leaves many people just simply paying over the odds.

Switching to a low fixed-rate mortgage could save you and your family, not just hundreds of pounds per year, but hundreds per month. 

A mortgage broker can help to highlight what your saving could be as part of a Mortgage Review.

Mortgages for Doctors and Dentists

If you are looking to move house, or buy an investment property in the near future, keep an eye out every week for our Mortgage Monday – updated rates and best deals, including 95% mortgage options for first-time buyers.

Sample best rate mortgages:

2 yearFIXED - 65%1.23%1.19%Saving money by remortgaging
2 yearTRACKER1.24%1.24%Taking advantage of low Bank of England base rate
3 yearFIXED - 65%1.59%1.59%Saving money by remortgaging
5 yearFIXED - 65%1.84%1.84%Saving money by remortgaging
10 yearFIXED - 65%2.49%2.49%Long-term reassurance of low monthly payments
2 yearFIXED (Offset) - 60%1.29%1.29%Saving money by remortgaging
2 yearFIXED - 90%1.95%1.95%First-time buyers with small deposit
2 yearFIXED - 85%1.52%1.39%First-time buyers with small deposit
2 yearFIXED - Buy-to-Let - 75%1.94%1.76%Property investors with a moderate deposit
Average lendersStandard Variable Rate4.37% (Mar)
4.28% (Apr)Flexibility

Read more of Chris’s monthly mortgage features:

specialist-mortgage-adviserGet a mortgage review with Chris

If you would like us to undertake a review of your current mortgage or compare various mortgage deals across the market, please contact Chris:

icon_phoneTel: 01403 780 770


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