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UK Mortgages: long-term deals to save up to £400 a month

The average standard variable rate (SVR) for mortgages has climbed to its highest level for more than 15 years, so many people sitting on one of these mortgages could save several hundred pounds a month by switching to a fixed-rate deal.

That was one of the key takeaways from data issued this week that also signalled that rates on new fixed-rate mortgages may start to rise again.

A series of Bank of England interest rate rises – 12 since December 2021 – and the chaos triggered by last September’s mini-budget from Liz Truss’s government mean it has been a stressful and costly time for millions of people with a mortgage or looking for one.

However, the financial data provider Moneyfacts says the home loans market “shows positive signs of resilience and growth”. It pointed out that the total number of mortgage products available has doubled since last October, jumping from 2,258 to 5,264 this month.

Meanwhile, earlier this month, the average rates on new two- and five-year fixed deals have fallen to 5.26% and 4.97%, respectively. However, that is unlikely to provide much cheer to those looking to replace a fixed-rate deal ending now or soon, who typically face much higher monthly costs.

In May 2021, the average new two-year fixed mortgage rate stood at 2.57% and is now more than double that. Similarly, the average five-year fixed mortgage rate in May 2018 stood at 2.91% and is now more than two percentage points higher.

Soaring interest rates mean that many of the 1 million or so people sitting on their lender’s SVR – which borrowers typically go on to when a deal ends – should urgently think about moving to a cheaper product. According to Moneyfacts, SVRs vary dramatically across the market, but they have all been going up, and the average rate has climbed to 7.37%. That is the highest level since December 2007.

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