What do you reckon is the average mortgage interest rate? Not the rate you pay, but the average across all mortgages? Last month it was just 2.99 per cent. If you have a mortgage and are paying more than that, you’re being charged more than most.
Are you being overcharged? It will depend on what type of deal you have and how much equity you have in your property, but I reckon most people could cut their monthly mortgage costs by switching deals at the moment.
And if you think it will be too much bother to switch then bear in mind that your lethargy could cost you thousands of pounds. Sure, it may take a few hours to arrange a new deal these days under tougher mortgage rules, but it must be worth it to get a few thousand extra in your pocket.
If you haven’t started a new deal in recent times, you’ve probably reverted to a lender’s standard variable rate. According to analysts Moneyfacts, the average standard variable rate currently stands at 4.81 per cent.
That’s 1.82 per more than average rates which may not sound much but actually translates into a hefty chunk extra each month. As an example, if you had a £200,000 repayment mortgage over 25 years, your monthly charge would be around £947. The same mortgage charged at 4.81 per cent would push monthly charges up to £1,147, a £200 difference.
If that potential £2,400 saving a year isn’t enough to galvanise you into action then what about if you switching into the current market-leading two-year fixed deal? If you have a 35 per cent equity in your house the rate charged is just 1.49 per cent from Norwich & Peterborough. That rate brings the monthly charge in our example right down to £799 – £348 less than an average standard rate.
In fact the highest standard variable rate is Kent Reliance’s 6.08 per cent – that would make monthly repayments £1,298 in our example, £499 more than the two-year fixed deal. That’s a difference of roughly £6,000 a year! Still can’t be bothered to switch?