Borrowers could save almost £5,000 on their mortgage payments by switching to a new fixed rate two-year offer, analysis by Experian and L&C Mortgages has suggested.

These figures come as the Bank of England yesterday announced an increase to its base interest rate from 0.25% to 0.5%.

According to the calculations, a homeowner with a £150,000 20-year mortgage loan on a lender’s standard variable rate (SVR) of 4.49% will have a monthly repayment of £948.16. The same mortgage on a two-year fixed rate remortgage deal of 1.34%, however, would have a monthly repayment of £712.83. This would represent a saving of £5,647.92 over two years, or £235.33 per month.

Taking the arrangement fee of £999 into account, this would still leave a homeowner better off by £4,648.92 over the two-year period.

Furthermore, separate data from Experian indicates that around 5.5% of homeowners could be coming to the end of their fixed term deal in or over the next three months, meaning they would lapse onto their lender’s SVR unless they remortgage.

When the Bank of England last increased the interest rate – up from 0.1% to 0.25% in December – Experian calculated that the amount a consumer could have saved by remortgaging in December has since been reduced by £370 over 24 months.

Despite yesterday’s base rate rise to 0.5%, the credit reference agency is still urging consumers to consider switching to a new deal to “take control of their finances”.

“The cost of living continues to increase, with many consumers feeling a squeeze on their finances,” said Experian head of consumer affairs, James Jones. “By exploring remortgage options now, homeowners could secure substantial savings by switching to a new fixed rate mortgage deal, to help offset the effects of inflation.

“Taking no action will mean you lapse onto your lender’s standard rate, which will usually lead to a hike in your monthly payments.”

L&C Mortgages associate director communications, David Hollingworth, added: “High inflation is pushing up costs for households and resulting in the increased likelihood of higher interest rates.

“Mortgage rates have already nudged up since last year but remain very competitive and shopping around could give homeowners the chance to slash their outgoings and protect against further rate rises. Lenders have typically been passing on the last base rate rise to those on standard variable rates, which remain much higher than the best deals on the market.”

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