Helen Nugent

Lenders punish borrowers who slip onto standard variable rates

When you’ve been writing about money for a while, a few key phrases crop up again and again. But of all the useful words employed in the world of consumer finance, ‘shop around’ is by far the most popular.

‘Make sure to shop around’ never goes out of fashion, and for good reason. It applies to pretty much every financial product there is, from bank accounts, saving plans and life cover to car insurance, ISAs and mortgages. It’s that last one I want to concentrate on today.

New research from Trussle, an online mortgage broker, has found that the UK’s six biggest mortgage lenders are penalising customers who slip onto their Standard Variable Rates (SVR) with a £3,242 hike in annual interest repayments. That’s more than a month’s income for the average household.

I read this study with a weary acceptance – twas ever thus. Although I’ll admit that the scale of the interest rise was more than I expected.

In its wide-ranging Mortgage Saver Review, Trussle compared average SVRs and two-year-fixed rates from 76 lenders over a six-month period. It found that borrowers with Lloyds, Nationwide, Santander, RBS, Barclays, and HSBC, which collectively serve 69 per cent of the market, would see their monthly interest rate jump by an average of 2.5 per cent when automatically transferred from a leading two-year fixed rate to an SVR at the end of their fixed period.

We know that many of this country’s 11.1 million mortgage borrowers do successfully remortgage before being moved to a SVR. But many do not, and there are a number of reasons for this including laziness and a lack of understanding of potential savings. In addition, of the three million households currently on a lender’s SVR, around 1 million are ‘mortgage prisoners’, unable to switch because the introduction of stricter borrowing rules means they fail to meet the criteria for a new mortgage.

Already a subscriber? Log in

Keep reading with a free trial

Subscribe and get your first month of online and app access for free. After that it’s just £1 a week.

There’s no commitment, you can cancel any time.

Or

Unlock more articles

REGISTER

Comments

Don't miss out

Join the conversation with other Spectator readers. Subscribe to leave a comment.

Already a subscriber? Log in