The index showed that switching a £100,000 mortgage from the current average standard variable rate (SVR) of 6.59% to the current MoneyFacts best buy two-year discounted variable rate offer could save a borrower £1,740 in the first year even after allowing for upfront remortgage fees.
Further, by switching to the MoneyFacts best buy two-year fixed rate mortgage a borrower could save £1,410 on the same basis.
Fixed rate mortgages have increased in favour of late and the first year savings for switching from the current average SVR to a fixed rate deal are considerably higher than 12 months ago according to the Index.
Your Move has said that the relative attractiveness of 5 year fixed rate deals have increased significantly compared with 2 year and 3 year fixed rate deals, with first year savings tripling over the last 12 months.
While still high compared with last year, the savings that may be obtained from two-year and five-year fixed rate offers have fallen a little from the recent peak in February this year.
First year savings from remortgaging to discounted variable rate deals have stabilised since November 2004, after mortgage regulation was introduced.
While the highest rate first year savings are currently obtained through the two-year discounted variable rate offer, even higher first year savings, of £2,010, could have been obtained in July 2004.
While first year savings are lower for three and five-year deals, total savings over the full-term of the new loan (compared with retaining a mortgage on 6.59% current average SVR) are much higher the longer the discount period.
Jon Round, remortgage analyst at Your Move comments: “The benefits of remortgaging are high, not only in the first year after remortgaging but potentially over the full-term of the loan. The most popular borrower’s choice remain two-year discount mortgages which offer first year potential savings of over £1,700 on a £100,000 mortgage switch.
“However, remortgaging to these deals runs the risk that similar attractive offers will no longer be available after two years. Borrowers may well be wiser to lock in their savings with longer term deals.
“A switch to a five-year discounted variable rate mortgage could result in full-term savings of over £10,655- assuming that the current average SVR of 6.59% continues. Switching to the best buy five-year fixed rate deal could result in “full term” savings of £9,261. If interest rates rise over the next five years the potential savings for fixed rate mortgages could be even higher. Obviously it should also be borne in mind that if interest rates were to fall over the same period, potential savings for fixed rates could be reduced.
“The benefits of switching to both two and five-year fixed rate deals, though higher than a year ago, have eased slightly over the past month. Prospective remortgagers may well need to act quickly to get the best savings from these offers, or face the risk of lenders introducing less attractive deals in the coming months.”
