Tesco Bank has claimed that up to 2.5 million home buyers in the UK may be over-paying on their mortgage as a result of falling onto higher Standard Variable Rates (SVRs) at the end of their fixed rate period.
The bank says that with the typical SVR at 4.39% compared to the average two-year fixed rate at 1.95%, these customers could be over-paying on their mortgage by up to £274 a month.
Tesco Bank’s new research reveals that one-third of home buyers would need to reduce their discretionary spending should interest rates increase by 0.25% – equivalent to £21 per month on an average mortgage balance.
In addition, the research reveals that while 62% of prospective home buyers are optimistic about their housing prospects – a reduction of 11% over the past six months – a third of prospective home buyers are more pessimistic, citing economic uncertainty, budgetary pressure, and the prospect of future interest rises as key concerns around purchasing their first home or moving house.
David McCreadie, managing director of Tesco Bank, said: “Our goal is to reward the loyalty of our customers. Our latest home buyers research illustrates that customers continue to face many challenges when buying a home and so we give them a little help by offering our competitive rates when their fixed rate term comes to an end.
“Alongside our competitive mortgage rates, we are also launching a series of guides to help customers navigate some of the potential bumps in the road as they move into their new home – especially those who are moving home for the first time.
“Uniquely, customers can also collect Tesco Clubcard points on their mortgage repayments, giving them access to a great range of Clubcard Reward Partners for savings on family fun, travel and eating out, which is especially useful having just moved home.”