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Many mortgage holders 'better off for reverting to variable rates'

By Joel Stanier

4 November2011

Row of terraced houses Most homeowners who have automatically moved onto their mortgage lender's 'standard variable rate' after finishing a fixed-rate deal are paying much less as a result, according to the Council of Mortgage Lenders (CML).

The standard variable rate, or SVR, is the interest rate a mortgage lender charges once a homeowner's discounted fixed-rate or tracker deal has come to an end.

And the CML found that on average, homeowners who previously had a fixed-rate deal are around 2,600 a year better off now they pay a variable rate.

This is because a lot of people have recently come to the end of mortgage deals that started in 2009 or earlier, when interest rates were typically much higher.

In fact, the CML predicts that even if interest rates increase in line with market predictions, 85% of borrowers who have reverted to variable rates would still be paying less by the end of 2021, and 58% would still be paying less throughout 2014.

A mortgage expert at Think Money said: "It's well-known that a lot of homeowners have saved money by switching to tracker or variable-rate mortgages, or a cheaper fixed-rate deal. But even those who have automatically moved onto standard variable rate deals stand a good chance of saving money at the moment.

"However, we urge homeowners not to take lower mortgage payments for granted. Interest rates will increase at some point in the future, and when they do, some people could struggle to keep up unless they have made room in their budgets."

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Tags: CML, Council of Mortgage Lenders, mortgage, mortgage rates, mortgage deals, variable rate, standard variable rate, fixed rate, remortgage

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