Paying more for their mortgage than they need to.
Three million households will pay an extra £4 billion a year on their mortgage by staying on their Standard Variable Rate (SVR).
According to broker London & Country, more than three million borrowers are currently sat on their lender's SVR. As a result they are paying out a whopping £1,272 extra a year on average.
What is the SVR?
The SVR is the rate you move onto when your initial mortgage deal comes to an end. So for example if you take out a three-year fixed rate mortgage, at the end of those three years you will move onto the lender's SVR.
[SPOTLIGHT]This rate is variable and can be increased at any time, irrespective of what is happening with Bank Base Rate. It is also generally a much higher rate too. For example right now Halifax's 'Homeowner Variable rate' is 3.99%, while HSBC's rate currently stands at 3.94%.
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Why borrowers are still on their lender's SVR
There are a number of reasons that a mortgage borrower will be sat on their lender's SVR. Some will simply be unaware that they could remortgage to a more competitive deal.
However, there is concern that plenty of others will be effectively 'mortgage prisoners', blocked off from a better deal their existing lender, their bank, or even both. The Mortgage Market Review, which saw lenders have to employ stricter criteria when assessing a mortgage application, has meant that some homeowners are will struggle to remortgage because they no longer fit eligibility criteria, trapping them on a rubbish rate.
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How much you could save
If you are sat on an SVR, you're probably wasting money. So shop around for a new deal!
Head to the loveMONEY mortgage centre to see which deals are available to you, or check out our regularly updated pieces on the top fixed rate and tracker rate mortgages.
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Mortgage borrowing into retirement: what are your options?
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Mortgage rates hit new lows as lenders widen choice for all borrowers