Research by Yorkshire Building Society shows that the number of SVR mortgage customers with less than 85% LTV has soared to 1.7 million in past 12 months. Yet these borrowers could benefit from up to £1.80bn a year interest savings by taking up current ‘best buy' deals.
However, an additional 440,000 high LTV (above 85%) mortgage payers are unable to benefit from current best buy deals due to having insufficient equity in their homes. This number, trapped in ‘mortgage limbo', has risen significantly since last year.
For every 1% rise in UK house prices approximately 16,000 SVR mortgage payers are released from mortgage limbo due to the lowering of their current LTV, enabling qualification for a better ‘best buy' deal.
According to the Yorkshire, those households on SVRs have typically come off fixed term discounted mortgage deals which were available two or more years ago. Lenders’ SVRs, currently averaging 5.04% are now well above current best buy deals.
However in the present environment the most competitive deals are only available for loans that have low LTV ratios, typically less than 85% (meaning over 15% in equity). Those coming off special deals on to SVR, but with LTVs remaining above 85%, will be unlikely to remortgage to a more attractive rate.
The good news is that 75% of the current 2.3 million SVR mortgage payers are ‘free to move.' These 1.7 million (21% of the total UK mortgage market) who have LTVs below 85% have over £116 billion mortgage assets and are free to move to more competitive rates that could collectively save them up to £1.8 billion a year interest payments.³
In addition, the good news for first-time buyers is that the market is starting to open up and it is possible to get deals at 90% LTV.
Tom Girling, mortgage product manager at Yorkshire Building Society commented: "A record number of mortgage customers are currently stuck in ‘mortgage limbo' on SVR rates that are generally far higher than best buy deals. Our analysis shows that the vast majority could make significant savings by switching to a better rate mortgage and with 80% having at least 15% equity in their home, they are free to switch lender right now."
