HSBC has estimated that 4.4 million mortgage borrowers, representing 39% of the total mortgage market, are now on their respective lenders’ Standard Variable Rate (SVR).
The average of UK lenders SVRs is currently 4.86%.
Typically these households have come off fixed or discounted rate mortgage deals which were available two or more years ago.
HSBC says that, in principle, these SVR borrowers are able to remortgage to a better deal without paying the early redemption penalty that would have applied throughout their fixed or discounted rate period.
However, often better mortgage rates are only available for customers with low LTV ratios. To be eligible for a sub 4% rate, a maximum 85% LTV is necessary. While there are some loan offers available for 90% LTVs or above, invariably they have associated mortgage rates higher than the lender’s typical SVR.
However, HSBC says there are an estimated 3.6 million SVR borrowers with LTVs below 85% free to move to a better mortgage rate. This is up 22% since Q3 2011 and represents 32% of the total mortgage market.
For a borrower, with equity of 15% and a loan of £150,000, on a typical SVR of 4.86%, moving to a two year discount rate of 3.84% would achieve an annual interest saving of £1,034.
Collectively if the “free to move” SVR mortgage borrowers could find just 0.5% interest savings on their £301 billion outstanding loans, they could make a combined annual saving of over £1.0 billion in first year monthly repayments, HSBC estimates.
Peter Dockar HSBC’s head of mortgages, said: “The UK mortgage market has 3.6 million SVR borrowers who can switch to a more competitive rate.
“Even those with equity of just 15% could each save a potential £90 per month in interest payments.”