Analysts point out that with a number of building societies increasing their SVRs many people would be better off re-mortgaging. Research from moneysupermarket.com shows that 85% of SVRs are more expensive than the cheapest two year deal including fees. Only seven SVRs are better value than the best tracker, it found.
‘Since the start of the credit crunch the re-mortgage 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, points out Hannah-Mercedes Skenfield, mortgages channel manager at
moneysupermarket.com.
But she says there has been a shift over the last month or so. ‘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,’ she declared.
However, 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.
‘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,’ said Skenfield.
‘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,’ she added.
For those considering a tracker mortgage, moneysupermarket.com’s figures show that, taking the arrangement fee into account, the best deal is
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.
‘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. But recent increases show this may no longer be the case for many borrowers,’ explained Skenfield.
‘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,’ she added.
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