SVR borrowers considering right time to remortgage

Hannah-Mercedes Skenfield, mortgages channel manager at moneysupermarket.com, said: "Since the start of the ‘credit crunch’ the remortgage market has, essentially, been closed. Most borrowers on SVR had been enjoying a better rate than that on offer to new borrowers and the increasing of LTV criteria meant people couldn’t remortgage anyway. Over the last month or so we’ve seen the market shift. SVRs have increased, rates for new borrowers have been falling and we’ve seen an increase in the availability of mortgages even at higher LTVs. The remortgage market is open for business once again."

One barrier to people moving off an SVR deal onto a fixed or tracker rate mortgage is the arrangement fee involved. However moneysupermarket.com figures show that the best two-year fixed rate mortgage, with fee included, is First Direct’s fixed rate 3.29% deal with a £998 fee. Taking into account the initial arrangement fee, the actual cost of this mortgage would be have an equivalent rate of 3.8% after two years, which is only beaten by 13 out of 85 SVR deals.

Skenfield said: "These figures really show that for many people, now is the time to switch. The prospect of an arrangement fee can be off putting, however, our analysis shows that even when taking the fee into consideration and provided you have at least 25% equity in your property, the vast majority of SVR deals do not compete with the top fixed rates. Taking time to work through the sums involved when deciding whether or not to fix your mortgage is crucial. Fixed rates aren’t likely to get much lower in the near future, so the quicker you act the better."

For those considering a tracker mortgage, moneysupermarket said that, taking the arrangement fee into account, the best deal was Alliance & Leicester’s two-year offering, which currently stands at 2.49% with a £995 fee. Taking into account the initial arrangement fee, the actual cost of this mortgage would have an equivalent rate of 3.07% – which beats all but seven SVR deals currently available.

Skenfield said: "In some ways the case for a tracker mortgage over an SVR deal is even more compelling than for a fixed rate. The only reasons you might consider staying on an SVR over a fixed rate is either your current SVR is cheaper than the best fixed-rate deal or that you believe SVR rates will remain low for some time to come – recent increases show this may no longer be the case for many borrowers. Neither of these arguments really applies to tracker mortgages, with only seven cheaper SVR deals than the best tracker it is unlikely you are making a saving by remaining on your current SVR deal. And if SVRs are going to remain low for a while, then the same can be said of trackers. In fact the added value of a tracker is that lenders can’t re-price them independently of a static Base Rate – something which is already happening with SVRs.

"In short, if you believe rates will be going up shortly and want the security of a fixed monthly payment you’re best to fix now; and if you believe they’ll be staying low for a while, you may be best to move on to a tracker. Either way you’ll be lucky to be on an SVR that’s worth sticking with."

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