One in four homeowners with the highest mortgage rate – and some mistakenly think it helps pay them off faster

One in four homeowners pay their lender’s high standard variable mortgage rate – and some even think it helps them pay off their loan faster …

  • Borrowers could save £ 4,080 per year by ditching their standard variable rate
  • This is the “default” rate at the end of your initial term and can go up to 6%
  • Some thought that higher interest payments would help pay off the mortgage faster
  • Habito’s research revealed an alarming lack of refinancing awareness

More than one in four homeowners get their mortgage lender’s top rate – and some oddly enough think it will help them pay off their loan faster, new research shows.

Research by online mortgage broker Habito found that 27% of people used a standard variable rate – the “default” lender interest rate that buyers drop when the initial term of their mortgage agreement ends.

Being on an SVR with one of Britain’s six big lenders could cost them an additional £ 4,080 each year compared to the cheapest offers from those lenders, Habito said.

Re-mortgage away from an SVR could save homeowners thousands of pounds a year

The lowest two-year average deal offered by these lenders was 1.26%, while the average SVR was more than double at 3.53%. Other lenders have SVRs of up to six percent.

In addition, nearly one in five people surveyed did not know whether they were on their lender’s SVR or not.

Habito’s research revealed a worrying lack of awareness about remortgage and why people are doing it. Alarmingly, one in ten believed that because their monthly payments were higher, SVR would allow them to pay off their mortgage faster.


As with savings accounts, energy bills, and auto insurance, mortgage lenders will give you an attractive fixed-term offer to lure you in before moving on to a less lucrative offer later.

A lender’s standard variable rate, also known as a reversion rate, is the rate your lender will move you to when your initial two, three, or five year term has passed – unless you remortgage.

Your SVR can be two or three times more expensive than the rate you were previously – and because it is variable, what you pay can change each month. Unlike a tracker mortgage, it is not tied to the Bank of England base rate – so the lender sets the rate themselves.

However, there are some advantages to being on an SVR. Most don’t have a prepayment charge, so you can overpay or get out of the mortgage at no cost. Arrangement fees are also low, but this is offset by higher interest.

SVRs are the only option for people who cannot remortgage – either because they have very little equity in their home or because they have almost paid off their mortgage and therefore do not meet minimum loan thresholds. lenders.

This is not the case because the extra money is paid in interest, rather than towards the mortgage balance.

Fewer people remortgage

Despite cost savings at a time when more and more people worry about their financial security, the most recent data from the Bank of England showed that refinancing fell 33% between February and November 2020.

Habito discovered that this was in part due to misconceptions about the remortgage.

One in six respondents (17%) said it involved taking on more debt, or was something people did “out of financial necessity”.

Six percent had no idea what the remortgage was at all, while eight percent thought it meant taking out a second mortgage on the same house, also known as a second mortgage.

Others were concerned that lenders would scrutinize their finances in the current economic climate, which applied to 11% of those polled.

Just over half of respondents (54 percent) knew that refinancing was typically done to move to a more competitive interest rate and save money on your repayments.

Daniel Hegarty, Founder and Managing Director of Habito, said: “With the UK likely facing another year of uncertainty, it’s more important than ever to make sure you don’t overpay your mortgage.

“If you have a 2-year fixed rate, make sure you have a regular refinancing cycle. We see remortgage a bit like changing utility or broadband providers, but with higher returns.

“There are a lot of remortgage options out there – whether you’ve been on vacation, your income has gone down, or you’ve taken a mortgage payment vacation, your lender should be open to you doing a product transfer with them. ”


1) Make sure your credit score is at its best before the end of your fixed term, to maximize your chances of getting a good deal when you remortgage

2) Start early. The remortgage can take a few weeks, so start thinking about changing about three to four months before your fixed period ends.

3) Use a mortgage calculator to determine how much you could save. Habito has one here

4) Talk to a mortgage broker for advice on the best deal

5) Beware of additional fees associated with your new mortgage offer. Take this into account when calculating your monthly costs to ensure you get the cheapest deal possible

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