Homeowners on a standard variable rate (SVR) mortgage could save up to £257 a month by switching to a fixed rate repayment mortgage deal, the equivalent of £3,084 a year, Compare the Market analysis has found.

With the Bank of England (BoE) raising the base rate to 5.25%, the current average five-year fixed rate mortgage is 6.37%, according to the latest Moneyfacts’ data. By contrast, the average SVR rate is 7.85%.

With the average mortgage debt in the UK totalling just over £257,000, homeowners that are coming to the end of their fixed rate mortgage could soon be paying hundreds of pounds more a month if they roll onto a lender’s average SVR rate. The Office for National Statistics (ONS) has found that more than 1.4 million households are set to renew their fixed rate mortgage this year.

However, with interest rates and living costs rising significantly over the past years, many homeowners will face increases to their mortgage repayments, even when remortgaging. The average two-year fixed rate mortgage has risen by 2.9% in the past 12 months, rising from 3.95% in August 2022 to 6.85%.

The Financial Conduct Authority (FCA), UK Finance and the Government have come together with the UK’s largest mortgage lenders to create the mortgage charter, which is a commitment to the fair treatment of borrowers and measures designed to make mortgages more accessible and affordable.

Compare the Market has urged homeowners who are either coming to the end of their initial fixed rate or are already on a SVR to take a look at what their options may be to get the right deal for their circumstances.

Director at Compare the Market, Alex Hasty, said: “We understand it’s a difficult time for many homeowners, as SVRs and fixed-term rates continue to be a lot higher than they were even a year ago. Another rate rise from the BoE also means many are feeling concerned about how this will impact their mortgage payments further. Those soon coming to the end of a fixed rate deal may likely see their monthly repayments go up significantly, even if they’re planning to move onto a new fixed deal.

“For most homeowners, finding a new fixed deal on your mortgage when your current one comes to an end, as opposed to moving onto your lender’s SVR, could be a way to secure a more preferable interest rate and also helps ensure you have a clear idea of your monthly outgoings.’’

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