Sam Dunn:'How can we get a better rate?'

House Doctor

Question: Our two-year fixed mortgage with Chelsea building society has ended and we've gone to its standard variable rate (SVR) only to discover that it stands at a huge 5.79 per cent. Yet friends also on an SVR are only paying 3 per cent in some cases. Is there any way to switch such rates? It seems ridiculously unfair that luck of the draw means we pay a huge sum compared to somebody else paying less but with a similar mortgage. Our loan to value (LTV) is about 90 per cent.
MN, Gloucestershire

Answer: It's a fabulous fairytale for some; for others a gruesome Brothers Grimm story. The turnaround in fortunes of the once reviled standard variable rate is a modern fable that ends well for some but badly for others. Before the credit crunch began to take hold in late 2007, the SVR wasn't a prized mortgage product – in fact, they were horribly uncompetitive and expensive.

But after the crunch – and the Bank of England pushed down base rate to its lowest level for centuries in a bid to stave off economic collapse – it turned from the ugly duckling in the mortgage market to a very desirable swan.

When base rate hit 0.5 per cent in March 2009, plenty of SVRs began to edge down in response – making many variable rate deals such as trackers much cheaper.

Borrowers who had been paying £1,200-a-month for their base rate plus 1 per cent tracker – previously considered a pricey product – suddenly found themselves paying out just £650, saving a fortune.

Critically, tens of thousands of homeowners sliding off a two-year fix and on to their SVR similarly found themselves celebrating. Instead of having to remortgage at 4.5 per cent, they could loiter on their lender's main rate for less and save money.

But some lenders, like yours, were unable – or unwilling – to follow suit. So while those such as Nationwide or LloydsTSB were able to notch their SVR to as low as 2.5 per cent, others including small building societies kept them high. The worst offenders include Chesham building society, at 6.45 per cent, and Stroud & Swindon, at 5.99 per cent.

Recent research from Moneyfacts financial data specialist showed that, in January, the maximum saving to a borrower with a £150,000 loan on an SVR who had benefited from the cheapest SVR over 10 months – compared to one that had barely moved over the same period – was £5,670. "Some borrowers on SVR may have paid more than double for the same mortgage than if they had been with a different lender," says a Moneyfacts spokesman.

"The SVR has become a real product option for many borrowers – many borrowers now have absolutely no incentive to move to a new deal where, in many cases, the rate is much higher than the SVR."

Sadly, this leaves you with very few options, says David Hollingworth at broker London & Country, as lenders won't now accept new customers on to their SVRs.

"Switching to a lower variable rate is sadly not an option, so your best bet is to ask your lender if they can do anything for you."

Unfortunately, at 90 per cent, you won't be able to secure a fixed deal at any thing like your previous arrangement, he warns, and may have to stay on the SVR. If you had an 80 per cent LTV, Chelsea could offer you a two-year fix at 4.18 per cent.

However, unless you can get down to such a percentage – overpaying with savings, say – your outlook must be to ensure you can afford your repayments and hope that 90 per cent LTV deals begin to fall in price.