Home-owners who are approaching the end of their 2-year remortgage deals could see their rate more than double if they do not hunt around for a new Deal, experts recommend that you start to look for a new deal 3 months prior to the end of your current one.
In the coming months, borrowers who locked into record low rates two years ago could potentially see the cost of their mortgage repayments jump by thousands of pounds, as they revert to their lender’s standard variable rate.
The average 2-year fixed rate mortgage in May 2017 was 2.30%, and it was on its way to falling to a record low of 2.20% in October that year.
When an initial mortgage deal comes to an end, borrowers will revert to their lender’s standard variable rate (SVR). And often there are better deals to be had.
Borrowers who opted for a 2-year fixed deal two years ago could now see their interest rate more than double when moved on to the average SVR of 4.90%. according to the bank of England database
The average two-year fixed rate mortgage currently stands at 2.47%.
Experts predict motivation for borrowers to re-mortgage to a new rate rather than just sit on their lender’s SVR will strengthen in the coming months as competition between mortgage lenders to win remortgage customers increases.
Darren Cook, a finance expert at Moneyfacts, said: “Over the next six months, it is likely that many mortgage borrowers who secured a two-year mortgage deal two years ago may see their record-low interest rate expiring and will have no intention to revert to a rate that could see their interest rate double overnight.
“For instance, a borrower on a repayment mortgage of £250,000 who locked into the average two-year fixed rate of 2.20% in October 2017, if then transferred on to the predicted average lender’s SVR of 4.89% in October 2019 – assuming that the average SVR remains constant and no Bank of England base rate changes take place – will see their mortgage repayments increase by £4,336.20 per year.”
As more borrowers are motivated to re-mortgage, lenders may also improve their deals and marginally cut rates over the next few months to maintain a competitive edge.
He continued: “Indeed, the average two-year fixed-rate has already fallen this month, from 2.49% in March 2019 to 2.47% today.”
It will be interesting to see if the average rate falls further still as providers target re-mortgage customers.
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