The standard variable rate (SVR) on your mortgage is the lender’s default rate that borrowers end up on when they come to the end of a mortgage deal (e.g. a fixed rate mortgage).
The SVR tends to be several points above the Bank of England’s Base Rate, and will mean you are paying much more than you need to on your mortgage.
By remortgaging to a better deal, it’s possible to save thousands of pounds. For example, using the Money Watch mortgage repayment calculator, we can see that if you’ve got 20 years left on your £100,000 mortgage, at an SVR of 6.5% you will pay £756 per month for a capital & interest mortgage. Reduce the interest rate to 5%, and you’d be paying £668 per month, a saving of £88 per month, and £1056 over a year.
As an added bonus, if you can make overpayments on your new deal and decide to carry on paying the amount you were paying on the SVR (£756), you could reduce your mortgage term by over 3 and a half years, saving £11,901 in the process! Try out our mortgage overpayment calculator to see how much you could cut from your mortgage.
This post forms part of the Money Saving March series.