UK households have been warned over a mortgage mistake which could cost £3,000 in repayments. Homeowners who let their mortgage deal slip onto a higher Standard variable rate (SVR) rate when their fixed deal comes to an end can be adding thousands extra onto their repayments.
A third of homeowners (31%) have let their mortgage rates revert to a higher rate for at least one month after their deal has ended. If a homeowner lived in a home with the asking price similar to the UK average, £280,000, they would pay £1,300 on a fixed three-year 5.5 per cent rate.
But if that same person did not remortgage immediately at the end of the initial fixed term, the interest rate would revert to the lender’s standard variable rate – 7.5 per cent – costing an eye-watering extra £300 a month, or £1,660.
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The warning has come amid a worrying time for many UK homeowners as the Cost of Living crisis continues. Liz Edwards, a mortgage expert at finder.com, urged homeowners to check their deal to avoid being saddled with these mounting bills.
She explained in a warning: “It’s easy to let renewals slide for a while and even if you remember to renew your mortgage, if you leave it too late then you may need to wait a month or two for the rate on your new deal to kick in.
“For mortgages this can have a huge impact on the amount you pay. The extra monthly cost is shocking in itself but as an illustrative point, if someone paid off a 30-year mortgage using the current average revert rate vs the current average 3-year rate, they’d pay an extra £180,000 in needless interest.
“So, set a calendar reminder and make sure you find a new deal in plenty of time before your fixed-deal expires.”
