06/06/2017
The six biggest UK mortgage lenders are raking in almost £10bn pa in extra interest paid unnecessarily by 2 million borrowers whom they have moved onto their Standard Variable Rate (SVR) as their cheap loan deals expire, claims a study by Trussle, ‘the UK’s first online mortgage broker’.
According to ‘The Trussle Mortgage Saver Review’ 3 million of the UK’s 11.1 million mortgage borrowers are on their lender’s SVR – which, in the case of the ‘big six’ lenders * serving 69% of the market, means an average 2.5% hike in their interest rates.
While 1 million of them can’t switch because they fail to meet criteria for stricter borrowing rules, there is nothing to prevent the remaining 2 million from switching immediately and Trussle calculates that their failure to act lands them with an annual ‘mortgage inertia tax’ of £3,242.
Trussle’s research suggests the main reasons are
- 66% of them aren’t even aware that a SVR is typically much more expensive than a fixed or variable rate
- 25% of them don’t even know what SVR stands for
- 48% don’t know when their fixed rate mortgage comes to an end
- 41% hesitate to pro-actively manage their loans because of the negative experience of securing it in the first place
Potential solutions for the next government to consider include the introduction of a cap on SVR rates and a requirement for lenders to warn borrowers well in advance that their fixed rate agreement is coming to an end.
* Lloyds, Nationwide, Santander, RBS, Barclays and HSBC.