The chances are that you're paying too much for your home loan. We show you how just low rates can go, and how to switch and save!
If you have a mortgage (and over 11½ million households do), I expect that you may be able to quote your monthly repayment to the nearest pound, straight off the top of your head.However, although you may know how much your home loan costs, I bet that you find it much harder to reel off the interest rate that you pay. Is it 5½? 6%? 6½%? More? Who knows?Sadly, if you don't know what rate you're paying, then you've missed a trick, because the golden rule of borrowing (and saving) is: Know Your Interest Rate. After all, unless you know your interest rate, you have absolutely no idea how your loan measures up to others in the market.What's more, through ignorance or apathy, millions of homeowners are content to stick with the same lender year after year. Although they may have initially had an attractive special-rate deal, they failed to look around when it ended, and now pay their lender's standard variable rate (SVR). Alas, the SVR is usually a lender's highest interest rate, so these loyal (or lazy) borrowers are paying well over the odds!For example, here are the standard variable rates charged by a dozen leading mortgage lenders (sorted from lowest to highest):Lender SVRHSBC 5.50%Nationwide BS5.89%Britannia BS6.10%AbbeyLloyds TSB/C&G 6.50%Alliance & LeicesterBarclays/WoolwichBristol & WestNorthern RockRoyal Bank of Scotland/NatWest 6.59%Halifax/Bank of Scotland 6.65%Birmingham Midshires6.79%All of these lenders, bar HSBC and Nationwide BS, charge an SVR in excess of 6%. Meanwhile, the Bank of England's base rate is just 4.50%, so the more expensive lenders are making a margin of 2%+ over the base rate. This amounts to a licence to print money!If you can move your home loan to a better deal with your existing lender or one of its rivals, the savings can be hugely impressive. Indeed, when you consider that far lower rates are there for the taking, you'd have to be bonkers to pay your lender's SVR! For instance, the Best Buy tables from Moneyfacts list the following great deals (none of which lock you into a high rate after your special rate has ended):Discounted variable rates over two, three and five yearsLambeth BS: 4.25% for two years (fee: £440)Cheshire BS: 4.36% for three years (fee: £395)National Counties BS: 4.40% for five years (fee: £395)Fixed rates over two, three and five yearsPortman BS: 4.30% to 31 March 2008 (fee: £499)National Counties BS: 4.39% to 31 March 2009 (fee:£495)Portman BS: 4.59% to 31 March 2011 (fee: £499)It's worth noting that these table-topping deals are provided not by big banks, but by building societies. When it comes to mortgage lenders, small is beautiful, as I explained in Big Mortgage Lenders Provide Bad Deals. By the way, don't let arrangement and other fees put you off switching, because these can usually be added to your loan. In addition, competition for mortgage borrowers is fierce, so many lenders will pay your legal and survey/valuation fees for you, minimising your switching costs.Finally, when you go shopping for a cheaper mortgage, it's important to look beyond the headline interest rate, because you must take arrangement fees and other charges into account. However, with over 8,500 mortgages available in the UK, the choice is overwhelming.Hence, my advice is to use a no-fee mortgage broker, such as Fool Partner London & Country Mortgages. It does all the hard work for you, searching the entire mortgage market for your best deal, plus it sources additional deals not available elsewhere. Job done!More: Slash your housing costs in our Mortgage and Insurance centres!Cliff owns shares in Lloyds TSB and HBOS, parent company of Bank of Scotland, Birmingham Midshires and Halifax.