Re-mortgaging could save landlords more than £3,000 a year

That is according to an independent survey, which has been investigating the cost to borrowers of slipping onto their lender’s standard rate after their initial mortgage deal has finished.

When borrowers reach the end of their introductory offer, they can re-mortgage to find a better deal. However, if they do nothing, they will automatically start paying their lender’s standard variable rate (SVR), which is generally higher.

As an example a landlord with a typical loan of £173,677 (Average). If they sat on their lender’s SVR for six months or more, paying an average rate of 4.39%, they wold pay £7,549 in annual interest. But, by switching to a two-year fixed-rate deal at 2.3%, they would pay £4,100 per year in interest – a difference of £3449.

Whilst this is hypothetical, the scale of interest – relative to the original loan – would be similar to short-term, high-cost loans such as those provided by Wonga. Before it went into administration, the average payday loan of £250 would typically earn Wonga £150 – or 60% of the original loan.

While the mortgage sector and the payday loans sector are very different, this illustrates the comparatively high cost of remaining on an SVR.

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