Borrowers whose mortgage is maturing for the first time could save as much as £274 a month by remortgaging, a study has revealed.
According to Yorkshire Building Society, £5.6 billion worth of mortgages are due to mature in the UK this month, making it the second largest ‘maturity peak’ of the year.
But thanks to a combination of reduced mortgage rates and increased house prices first-time maturers could take advantage of big savings.
Take, for example, a homeowner who borrowed 90% of a £200,000 property when they first purchased the home in April 2017 and who was on an interest rate of 2.04%.
According to Yorkshire they could now benefit from a reduced loan-to-value (LTV) – which is the proportion of the property for which they are borrowing money – of 85% when taking out a new mortgage after the UK’s average house price for first-time buyers increased by 3% during that two year period.
Value of remortgaging
Charles Mungroo, senior mortgage manager at Yorkshire Building Society said it was vital homeowners with maturing mortgages realised how important it was to remortgage.
“We know it’s a busy time for homeowners remortgaging generally,” he said, “but for those coming to the end of their initial fixed-rate term for the first time this month, it’s important they understand the value of remortgaging and not reverting to a lender’s standard variable rate (SVR).”
There were also advantages for anyone who was due to come to the end of a five-year first-time mortgage. Indeed, Yorskhire explained borrowers who took out a five-year initial deal back in April 2014 would benefit from further savings, after the average cost of a property for a first-time buyer increased by 22%, meaning homeowners could now benefit from a reduced LTV of 75%.
Mungroo added: “The savings speak for themselves, but we understand that renewing a home loan for the first time can be daunting.
“We’d encourage those going through it to do their homework, seek help from a mortgage adviser and don’t always assume it’s easier or better value to stick with their current lender.”
Article ny Kate Saines for www.whatmortgage.co.uk