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Housing Solicitors

Homeowners with standard variable rate mortgages “paying over the odds” (29 June 2015)

Date: 29/06/2015
Duncan Lewis, Housing Solicitors, Homeowners with standard variable rate mortgages “paying over the odds”

Mortgage broker London & Country has estimated that 3.2 million households are “saddled” with expensive mortgages because they have a standard variable rate (SVR) mortgage and are missing out on lower rates as mortgage lenders compete for business.

As a result approximately one-third of borrowers are having to pay an extra £4 billion in total every year, rather than being able to take advantaged of “rock bottom rates”, the Daily Mail reports.

Each household on a standard variable rate mortgage is being charged around £1,272 extra each year – which mortgage analysts have described as a “ticking time bomb”. Standard variable rates are the “default loans” which lenders offer, which borrowers are transferred to once their fixed rate mortgage or tracker mortgage ends. Borrowers may continue to pay a higher rate mortgage for years before realising there are better deals around.

Mortgage lenders may also block a borrower from shopping around for a better deal, with many households ending up “mortgage prisoners”.

The new rules on borrowing introduced in April 2104 require lenders to look more closely at borrowers’ outgoings to make sure they are able to afford mortgage repayments – those with “non-status” mortgages or who are self-employed or older than the average borrower may also find themselves unable to change to a better deal.

A standard mortgage lasts for 25 years, so those over the age of 40 may find it more difficult to find a lender willing to offer a mortgage for the full term – even though more people are now required to work up to the age of 67 or 68 before drawing their State pension.

The founder of MoneySavingExpert.com, Martin Lewis, said:

“These affordability rules are nonsense and are trapping people on expensive SVRs.

“People are being rejected for mortgages and told they cannot afford a cheaper mortgage – it’s farcical and is only going to get worse.”

He added that the margin between the Bank of England’s base rate and SVRs had increased since the banking crisis from 1% and 1.5% to around 4%.

Since March 2009, the base rate has remained stable at 0.5% – and there has been speculation over when the base rate might rise again, which may add pressure to thousands of households already paying higher mortgage interest rates.

“If interest rates go back up to around 4%, then unless the margins come down on SVRs, households will be paying 8%,” said Mr Lewis.

“This will lead to massive repossessions and huge arrears,” he added.

David Hollingsworth of mortgage broker London & Country added that families were “paying over the odds…because they feel they’re stuck with that deal”.

Duncan Lewis Housing Solicitors

Duncan Lewis housing solicitors are able to advise homeowners on a wide range of housing and property matters, including remortgaging, debt management and mortgage repossession.

There are Duncan Lewis offices nationwide and Duncan Lewis is also a leading provider of Legal Aid services.

For expert legal advice on housing matters, call Duncan Lewis housing solicitors on 020 7923 4020.


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