The secret to lowering your current mortgage interest rate and monthly mortgage payments

Should you switch or stay put if you're coming to the end of your mortgage deal? Christina Jordan has the answer.

For the last decade the message to all existing borrowers was remortgage, remortgage, remortgage.

Any savvy borrower worth their salt wouldn't dream of languishing on their lender's standard variable rate (SVR) when they could move to a cheaper deal.

And the process became easier than ever with lenders falling over themselves to get your business. Free legal and valuation fees and quick turnarounds made us realise that switching your homeloan needn't be a hassle, and it could save you hundreds if not thousands of pounds.

So, we switched in our droves, with remortgaging making up the majority of lending for a long time.

But not anymore.

Despite a significant increase in June, remortgaging only accounted for 40% of all lending according to the Council of Mortgage Lenders.

So why have we stopped switching?

In a word -- rate. SVRs are now some of the market's cheapest options in the topsy-turvy mortgage world. That's cheaper than fixed rate deals and cheaper than trackers.

Super sexy SVRs

SVRs are no longer the much-maligned default rates. Now borrowers actively choose to stay on them, researching the market and deciding to stay put.

SVR can be a great option for existing borrowers because, not only will you have no remortgage costs, you also won't have to fill in any forms. It's what happens if you do absolutely nothing!

The cheapest SVR in the current market is from the Post Office at 2.49%, closely followed by Lloyd's TSB/C&G at a cracking 2.5%.

But not all lenders have super-cheap SVRs -- indeed there is a huge differential. Chelsea Building Society's SVR is 5.79% for example and state-owned Northern Rock'sis  4.79%.

Below are some of the UK's biggest lenders and their current SVR.

The top lenders' SVRs

*Nationwide customers with deals reserved on or before 29 April 2009 will revert to the variable Base Mortgage Rate (BMR) which is currently 2.5%

**This is not technically an SVR but a tracker pegged to the Barclays Bank Base Rate, which it is the lender's 'revert to' rate once special rate deals have ended.

When should you switch?

There are different deciding factors for most borrowers when it comes to working out whether it's worth remortgaging.

Your current lender's SVR

If you're with Lloyd's TSB and about to revert to a rate of 2.5%, you might think it reasonable to stay where you are for now -- and I would agree. But the table above shows that there is a wide variation in variable rates. Those with Leeds Building Society will revert to 5.49% at the end of their deal, for example. Finding out what you will pay each month if you don't remortgage is your first task.

What else can you get?

The second thing to consider is what else is available, and this is dependent on the level of equity in your property and your other financial circumstances. As a rule of thumb, many of the best deals are available to those with 25% equity, in full-time employment with sufficient income to cover the borrowing and no history of bad credit.

If you fit this mould of a low-risk borrower you'll have your pick of mortgages. and can search the market for a better deal than your existing lender's SVR.

But those borrowers with little equity (for example 10%) will face a very limited choice of new deals. These homeloans will be more expensive which makes remortgaging look far less attractive. The same stands if you're newly self-employed, have just been made redundant or have a history of bad credit. The best remortgage deals simply won't be open to you.

Factor in all the costs

Thirdly, you need to remember to factor in all the costs of switching, not just the rate.

If you go onto SVR you won't have to pay any fees, but if you switch you'll have to pay an exit fee (typically £250) to your current lender and arrangement fees to your new lender. These could amount to £1,000 or more and you may face legal and valuation fees (although these costs are often waived on remortgages).

Work out the total cost over the time period of the new deal you're looking at, and it should become clear which option is the cheapest.

Consider peace of mind

Total cost isn't the only factor for many borrowers. A standard variable rate can go up and down in line with interest rate movements. And, with rates at their lowest ever level, the only way is up. That may happen in the next few months or, as many expect, not until well into next year, but be aware that rates will rise.

It might be that you cannot afford large future increases in your monthly repayments and would prefer to pay a slight premium now to protect yourself. Two-year fixed rates start at 3.69% for those with 25% equity (NatWest) and five-year deals from just 4.95% (HSBC), which may be more appealing to you.

For many borrowers, the option of simply defaulting to their lender's low SVR and sitting there while rates are low is an attractive, cheap, low-hassle mortgage option that didn't previously exist. Just remember it won't stay low forever.

Compare mortgages at lovemoney.com

More: 12 top fixed-rate mortgages | 12 top mortgage trackers