Contractor mortgage holders, who are currently on their lenders’ standard variable rate, may be wondering whether it would be a good idea to remortgage and switch to a different product.
Before the global financial crisis in 2008, a standard variable rate home loan tended to cost more than a fixed rate or tracker mortgage. However, times have changed and now borrowers on SVR are paying about £2,600 less a year than they were on their introductory rate.
Fixed rate and tracker loans are also at their cheapest level for 20 years and this has led a lot of borrowers to question whether or not they should pre-empt an interest rate rise and fix their repayments now.
Market experts currently predict that the base rate will increase to just under 1% by the end of next year and 2% by the end of 2014. Based on these predictions, the CML says that by the end of 2012, 85% of those who have reverted to variable rates will still be paying out less every month than when they took out their original mortgage.
Of course mortgage rates do differ considerably by lender. Moneyfacts says the average SVR now stands at 4.8%, whilst data from Defaqto shows that the average two-year fix costs only 3.52%. The average three-year fixed rate mortgage comes in at 4% and a five-year fix attracts an average 4.22%.
Interest rates tend to be higher for people who can only put down small deposit payments, but those who can afford a 25% deposit have the pick of some great deals at present.
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