Published On: Tue, Jul 16th, 2019

Cheap mortgage: Homeowner reveals simple switch reduced their monthly repayment by £1,000 | Personal Finance | Finance

The average mortgage period lasts 25 years, according to The Money Advice Service. Lower or discounted interest rates may be offered during the start of a mortgage, with these deals usually lasting for a certain amount of time – such as two or five years. Once the deal ends, it may be that the mortgage-holder is switched onto the lender’s Standard Variable Rate (SVR). The Money Advice Service advises that the SVR will usually be higher than other rates being offered on the market.

“So when your introductory period ends, take a look at the market to see if switching to a new mortgage deal will save you money,” the website states.

“Bear in mind that if you only have a small outstanding mortgage the amount you stand to save might be too low to make switching worthwhile.”

A Mumsnet user has shared their own experience, having discovered they could have changed to a different mortgage rate.

The homeowner, who goes by the name “Highlandtime” on Mumsnet, explained that they had bought a house, and taken out a mortgage in 2006 – adding that they “didn’t really understand much about mortgages” at the time.

Creating a thread in October 2017, they wrote: “The bank offered me a rate of 4.8 per cent which was fairly typical at that time, and three years later when my deal expired I called the bank and asked what my options were.

“They said that when my deal ended I would automatically go onto the standard variable rate, which was only marginally higher than the rate I was on, and represented an increase of £7.65 to my monthly repayments.”

READ MORE: Cheap mortgage rates: MP backs call to ‘make switching fairer’ – can you save £1,000?

The mortgage-holder went on to explain how they had assumed that the SVR was a “good deal”, and had been unaware of any other options which could be available.

As such, they decided to let the deal expire, and move onto the bank’s SVR.

“Highlandtime” continued: “I came away with the understanding the SVR was my best option and I was lucky it was only a small increase.

“I also thought that I now was stuck on the SVR unless I wanted to remortgage with another bank.”

However, it was upon speaking with a friend when the homeowner realised that there may be a way in which to seek a better interest rate on their mortgage.

They told Mumsnet users: “Today I was prompted to phone the bank following a chat I was having about mortgages with a friend.

“I asked for a ‘rate change’ and opted for a deal which brings my rate down from nearly five per cent to just over one per cent !!!!!”(sic)

“My monthly repayment has changed from £1200 to £200. Great! But I cannot reconcile how I have been paying an interest rate of nearly five per cent for the past eight years.”

The Mumsnet user then sought a response from other Mumsnet users, asking if anyone else had had a similar experience, or had been successful in “recouping anything”.

They later explained that the type of mortgage they have is interest-only, and added: “I will now be making overpayments with my lowered monthly repayment, to repay capital. I could not afford to before!”

Some fellow Mumsnet users confused about the figures that the homeowner had shared in the thread, and “Highlandtime” soon explained that the one per cent rate is a two-year fixed deal.

They continued: “It is a relatively low mortgage loan, about only about 1/3 of the value of the property.”

READ MORE: What is a mortgage free home? What does it mean to overpay on mortgages?

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