Experian estimates 46% of mortgage holders could be on SVRs, but AMI says under 25%

The estimated number of mortgage holders on a standard variable rate (SVR) mortgage has increased to 46% during the UK lockdown period, up 2% from March, according to data from Experian.

The estimated number of SVR mortgages was calculated using the following criteria: the account has seen at least one payment increase; a payment increase was observed at either two years, three years, five years in line with the typical duration of mortgage products, and no change in mortgage term was observed or an account has been open for greater than five years.

The analysis found that a homeowner with a £150,000 20-year mortgage loan on a typical lender’s SVR of 4.44% will have a monthly repayment of £944.

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The same mortgage on a typical 2-year fixed rate remortgage deal of 1.14% would have a monthly repayment of £699, representing a saving of £5,880 (£245 per month).

Taking the arrangement fee of £999 into account, this would still leave a homeowner better off by £4,881 over the period of the offer.

The research did find that some homeowners have taken positive action during lockdown and sought savings; remortgage enquiries through Experian were up 92% over the last four weeks compared to the first four weeks of lockdown.

Amir Goshtai, managing director of Experian Marketplace, said: “Our latest analysis of the number of homeowners on an SVR mortgage may come as a surprise, especially when many households are facing financial struggles.

“But, with people focused on the health of loved ones and managing life in this new environment, it’s not surprising that household finances may have slipped to the back of many people’s minds.

“We want to help people take the stress out of managing their finances and support them over the months ahead, particularly given the economic uncertainty.

“That’s why we’ve been proactively contacting customers we think may be coming to the end of their existing mortgage and encouraging them to compare current market offers before they get switched on to their provider’s SVR, potentially saving them thousands of pounds.

“Additionally, our unique mortgage savings tool makes it easy for homeowners to quickly check if they can make a saving on their monthly mortgage payments.

“We’re starting to see interest rates and fees for fixed mortgages slowly increasing as the credit market reopens.

“Therefore, homeowners should review their mortgage now and take advantage of competitive interest rates while they still can to lock in a lower fixed monthly payment, giving them peace of mind and certainty for the months ahead.”

However, Experian’s proxy criteria did not take into account the fact that mortgage holders might remortgage and still see a payment increase, or that they might shift to their lender’s SVR briefly during the product transfer process, for example.

Robert Sinclair, chief executive of the Association of Mortgage Intermediaries (AMI), said: “AMI does not recognise this type of percentage as being realistic; we consider that less than 25% of mortgage holders will be on an SVR.

“And of course, brokers know that the rates being quoted as the alternative to SVR are only available to a very small number of the mortgage population.”