However, given the recent fall in fixed rates, some homeowners may find a better rate by remortgaging.
Whilst the total number of remortgages in 2012 was 12% lower than in 2011, there were some signs of improvement in the latter part of the year with a 7% increase in remortgaging activity between the third and fourth quarter.
Historically, remortgage activity has typically been driven by borrowers replacing their fixed home loans at the end of their term to avoid moving on to an SVR. This is because SVRs, on the whole, were more expensive and brought uncertainty over future monthly payments. However, this changed in recent years as interest rates fell to an all time low.
Even though SVR rates have generally been higher than fixed rates since August 2011, remortgaging activity on the whole has remained subdued, averaging 29,700 per month (37% of total mortgage lending). Over this period, the average SVR rate was 24bps more than average fixed rates (Fixed rates 3.96%; SVR 4.20%).
With fixed rates falling since August 2012, the incentive to remortgage should have increased. For example, if a homeowner took out a 2-year fixed rate in December 2012, their monthly payment would be £519; in the same month the payment on an SVR mortgage would have been £548.
Stephen Noakes, Mortgage Director at Lloyds TSB, comments:
“With SVRs at historically low levels, many homeowners have actually found their mortgage payments have reduced at the end of their term and the incentive to remortgage has been reduced. However, as we start to see fixed rates dropping, prudent borrowers taking stock of their home loans could benefit from their monthly payments falling further.
"The Lloyds TSB switching service guarantees to take the hassle out of remortgaging. With our new rates and £500 cash back for Lloyds TSB current account holders, now is the time for homeowners to consider the benefits of remortgaging.”
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