Homeowners who are rolling off their initial mortgage deal are being warned that the average revert rate has hit its highest level in at least 16 years.
At 8.18% at the start of October, the average standard variable rate (SVR) across all deposit sizes was at the highest level on Moneyfacts’ electronic records, which started in July 2007.
By comparison, across all deposit sizes, the average two-year fixed-rate mortgage at the start of October was 6.47% and the average five-year fix was 5.97%.
Rachel Springall, a finance expert at Moneyfacts, said that while fixed mortgage rates have been falling recently: “The average standard variable rate rose to 8.18% at the start of this month, standing at a record high.
“This rate has risen by 3.78 (percentage points) since the start of December 2021 and there may be borrowers either stuck or deciding to sit on their revert rate, hoping fixed rates will fall in the weeks to come.
“Borrowers would be wise to seek independent advice to go over their options or speak with their lender if they are struggling to make repayments.”
According to Moneyfacts’ calculations for the PA news agency, based on a borrower paying back a £200,000 mortgage over 25 years, back in early December 2021, when the average SVR was 4.40%, the typical monthly repayment could have been around £1,100.
But at 8.18%, the monthly payment could have jumped to around £1,567 – a cost increase of around £467 per month.
Sitting on a higher SVR for a while can cost thousands of pounds more.
If the borrower with a £200,000 mortgage had been on an SVR for two years at 4.40% they could pay around £26,400.
But if they remained on a rate of around 8.18% for two years they could pay around £37,600 over the period.
On Monday, Skipton Building Society unveiled a range of low-rate two-year fixed mortgages, to support members who may be at risk of payment difficulties. The “member only” rates are as low as 3.35%, for borrowers with a 40% deposit, and are available in a range of different deposit sizes.
The mortgage products will give owner-occupier Skipton borrowers approaching the end of their current deal the opportunity to bridge their payments by maintaining a lower interest rate for two years.
The deals do however carry a fee of 5% of the existing loan amount, which can be added to the mortgage balance.
Many lenders have been cutting fixed rates in recent weeks amid expectations over inflation and interest rates.
On Tuesday, first direct unveiled some further mortgage rate reductions, including a five-year fixed rate for borrowers with a 40% deposit at 4.87%.
Chris Pitt, chief executive of first direct, said: “We will continue to regularly review our mortgage range to ensure it’s competitive for our customers, whether they’re new to the bank or existing first direct customers looking to switch to a new deal.”
Many lenders have signed up to a mortgage charter, which offers various options for struggling borrowers, such as temporarily switching to interest-only payments or extending the term of the mortgage.
Moneyfacts also said that, looking at all mortgage types, the choice of mortgages available was at its highest level in more than 15 years at the start of October.
It counted 5,495 options at the start of October. The last time there were more deals available was in March 2008.
The average “shelf life” of a mortgage product before it is pulled from the market rose to 16 days in October.
This has increased for three months in a row, from a low point of 12 days in July, Moneyfacts said.