Failing to renew fixed rate could add hundreds £

The latest research by award winning mortgage adviser, Alexander Hall, has shown that mortgage holders who fail to sign up to a new fixed or reduced rate when their current mortgage term expires could end up paying hundreds more a month, highlighting the importance of remaining proactive and establishing new terms.

Alexander Hall looked at the monthly repayment being made by the average homeowner currently coming to the end of a two-year fixed term and how much more they are set to pay should they revert to a standard variable rate (SVR) in the current market, rather than renegotiating a new fixed term.

The research shows that, two years ago, the average homeowner would have required a loan of £217,502, having placed a 15% deposit on the average house price of £255,885 at the time. With the average mortgage rate for a two-year fixed term at an 85% LTV sitting at 4.98%, homebuyers would have been making a full monthly repayment to the tune of £1,269.

Today, the same homeowner coming to the end of their two-year fixed term would have a remaining loan of £208,277. With the average mortgage rate having reduced to 4.74%, this would see them lock in a new full monthly repayment of £1,241 - a saving of £28.33 per month, or £679.92 over the full two-year fixed term.

However, for those who fail to negotiate their mortgage terms, reverting to the standard variable rate at the end of their fixed term could cost them.

The average standard variable rate currently stands at 7.23%, meaning that the same remaining loan of £208,277 would see them making a full monthly repayment of £1,550 per month.

This is £281.29 more per month versus their original fixed term payment, equating to an additional £6,750.96 over the course of two years if left unchanged.

Stephanie Daley, Director of Partnerships at mortgage advisor, Alexander Hall, commented:

"Nobody wants to pay more than they need to when it comes to the monthly cost of their mortgage, but that's exactly what could happen if you allow your mortgage to drift onto a standard variable rate.

That's why proactivity is key when it comes to renegotiating your terms. Although your current lender may offer you a product transfer offer, this is unlikely to be the most competitive option and doesn't allow you to make other changes such as altering the overall term or loan amount.

This is where mortgage advisers come into their own, as they are able to compare products from lenders across the market to ensure you are getting the very best deal for your individual circumstances."