The latest data from Moneyfacts.co.uk reveals that the current average standard variable rate (SVR) mortgage for July 2020, which those coming to the end of their initial term could now be facing, is 4.46%. This means that borrowers whose mortgages are now maturing could be looking at a jump in rate of nearly 2% compared to the initial average two-year fixed rate deal they may have taken out in July 2018 (2.52%).
This month saw the average two-year fixed rate reduce to a historic low of 1.99%, meaning that those who are sitting on their current SVR could be paying 2.47% more in rate than if they were to have switched to a new two-year fixed deal at the start of this month. However, those in a position to consider a new mortgage deal may wish to move quickly, as over the course of this month, average rates have begun to rise.
Eleanor Williams, Finance Expert at Moneyfacts.co.uk, said: “Following the significant fixed rate war in 2019 and ever-tightening margins for mortgages, it was unclear how much impact the Coronavirus pandemic and subsequent Bank of England base rate cuts (still at a historic low of 0.10%) would have on fixed mortgage deals.
“It was therefore great news for borrowers that approximately three months on from the second cut to base rate – in line with when we would traditionally expect to see reductions filtering down to products – that average mortgage rates, such as the two-year fixed product, hit its record low of 1.99%. This seems to demonstrate that despite a volatile economic landscape, mortgage lenders are keen to lend at competitive levels where possible, particularly to those with higher levels of equity.
“Our latest research compares what those borrowers whose two-year fixed rate mortgages taken out in 2018 are likely to be facing as they now revert to a follow-on or SVR – currently sitting at an average rate of 4.46%.
“The average two-year fixed rate at the start of July 2018 was 2.52%, which means that those who are now reverting to their lender’s SVR could be looking at a rate increase of 1.94%. Financially, this could have meant that their monthly payments increased by £202.08* per month if they had not secured a new deal at the beginning of the month, when the average rate for a two-year deal was 1.99%. Considering current circumstances and the wide-spread concerns around household income many are experiencing at this time, this difference in payment could give an extremely welcome boost to monthly income.”