HSBC today report that an estimated 3.6 million borrowers on a Standard Variable Rate (SVR) mortgage could save money by re-mortgaging to a cheaper rate of interest.
The research suggests that there are 4.4million SVR mortgage borrowers in the UK, making up 39% of the total mortgage market. This means that 3.6 million, or 32% of total borrowers, in the mortgage market have the potential to move to a more competitive rate; according to the bank’s figures. This is an increase of 22% of those who could potentially change one’s re-mortgage rate compared to the third quarter of 2011.
With the average SVR rate of 4.86%, HSBC claim that 3.6million borrowers could move to a rate of less than 4%. However, in order to do so, borrowers do need a better Loan To Value (LTV), ideally with a loan of 85% LTV or less. HSBC estimate that if all these 3.6million borrowers could attain 0.5% interest savings, they could collectively save £1billion in the first year.
This may not necessarily be good news for first time buyers who struggled to come up with a reasonable deposit, and have roughly 90% LTV; making up 19% of SVR borrowers. First time buyers may find themselves trapped on a higher rate of interest because of taking out 2-5 year fixed rates in 2007-2010 and the subsequent drop in house prices in 2012. This is an increase of 40% from this time last year of those unable to get into the 85% LTV mortgage-band.
But, for every 1% rise in house prices, roughly 40,700 borrowers would potentially qualify for a lower LTV and be able to transfer to the under 85% LTV band. If the predictions by Halifax for 2013 become a reality, this may mean a potential for more than 80,000 borrowers who could find a better re-mortgage rate.
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