Homeowners who have lapsed onto a Standard Variable Rate (SVR) mortgage are collectively spending an extra £175 million a month, according to new research from MoneySuperMarket.
Homeowners on SVR mortgages could save £133.46 per month by switching to a better deal, the report said.
Over one in 10 mortgage holders in the UK are on an SVR when applying to remortgage a property (11.97%), and with nearly 11 million outstanding mortgages in the UK, this means over 1.3 million people may have lapsed onto these more expensive rates.
SVR or follow-on rates are normally more expensive than the original deal and 15% of those enquiring about remortgages are not aware that they will most likely be automatically switched to an SVR or follow-on rate when their initial deal term ends.
Those remortgaging for the first time are more than twice as likely to be unaware that this is how mortgage deals work, when compared to those who had remortgaged previously (16% and 7% respectively).
Emma Harvey, consumer affairs spokesperson at MoneySuperMarket, said: “Standard Variable Rates on mortgages are notoriously expensive and with 15% of those remortgaging being unaware of how they work, automatically lapsing onto them is a common and costly financial pitfall.
“Regardless of whether you’re on an SVR mortgage or another type, there could still be significant savings to be made when your initial mortgage deal comes to an end. In fact, we found that the average saving for mortgage holders still within their initial product period is £28.36 per month, which really adds up.
“In order to stay on top of how much you’re spending on your mortgage, be aware of when your current mortgage deal is due to come to an end and start researching rates several months in advance. You can arrange your new deal three months before the end date so that you switch over at the end of your initial term, ensuring you are always on the best deal.”