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News: SVR shock for homeowners

Mon, 19 Nov 07

SVR rates are startling and will be a major shock for mortgage borrowers, claims mform...

Borrowers opting for standard variable rates (SVRs) on their mortgages can see the rate charged vary by as much as 1.7 per cent, analysis* from online mortgage company mform.co.uk shows. On a £150,000 loan that could mean a difference of up to £2,550 a year.

SVRS currently average 7.51 per cent with 7.74% being the most commonly charged rate among the 62 lenders marketing SVR products direct to consumers and the highest nudging nearly eight per cent, analysis shows. mform.co.uk** research shows around two out of five borrowers have never moved lenders suggesting that many people still revert to the standard rate following the end of a discounted initial period..

It is warning customers coming to the end of their current mortgage deals to remortgage or risk paying as much as 7.94 per cent for their loan. mform.co.uk estimates between 40,000 and 60,000 homeowners are coming off fixed rate deals every month.

Major shock

Francis Ghiloni, mform.co.uk Marketing and Business Development Director, said: “The range of rates charged for SVRs is startling and will be a major shock for borrowers coming to the end of existing fixed deals.

“It is surprising that some lenders charge as much as 7.94 per cent for SVRs while others offer 6.24 per cent. Borrowers with a typical £150,000 home loan on the lower SVRs could save nearly £212 a month compared to those on the most expensive SVR deal.

“Generally the advice remains the same that borrowers ought to be wary of SVRs. However in some cases the flexibility offered can be attractive, particularly where the rate is competitive.

“And those deals around 6.24 per cent can stand comparison on a true cost basis with fixed rate and discounted deals when all the fees and charges are taken into consideration.

“We would suggest that customers looking for shorter term deals weigh up the application fees and exit penalties on the best offers and compare their outgoings against the best SVR deals which often come with no or very modest charges.”

For more information, please visit: http://www.mform.co.uk

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