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Thousands of borrowers stuck on higher mortgage rates

As mortgage rates decrease for most borrowers, thousands are trapped paying the much higher cost of a Standard Variable Rate.

Some of the lowest fixed rate products are now below 1%, while many of the products with a SVR are up to five times more expensive. The swap rate is the measure of how low the mortgage rates may go in a specified lending period. Lenders pay a swap rate, which is the cost of the capital to the lender. Following the UK’s decision to leave the EU, the swap rates plummeted.

Although lenders may still have tighter lending criteria, they will be offering some of the lowest ever deals. According to data from Moneyfacts, the cost of a two-year fixed rate product has fallen from 2.8% to 2.5% during the last year. The lowest priced two-year fixed rate deal is 0.99% but is only available to buyers with a 35% deposit. Lenders are also offering competitive rates for longer term fixed rate products, to retain custom.

However, some borrowers are unable to secure a new low fixed rate deal due to not meeting the lender’s criteria. In this case, the borrower is forced to pay the SVR, which could be as high as 5.79%. A home owner may come to the end of a deal only to be told that they don’t meet the current credit checks and that they must transfer to the current SVR, which could mean they are paying thousands more each year.

For anyone who finds themselves in this situation, mortgage advisers study for their CeMAP qualification to ensure they are qualified to assist home buyers.

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