With the average SVR now 8.18%, this could cost homeowners hundreds of pounds more each month compared to what they could be getting by remortgaging to a new deal with rates closer to the 6% mark.
Here, we reveal how much you could save by switching and if a SVR mortgage is ever a good idea.
What's the issue with SVR mortgages?
A Which? survey of 2,313 mortgage holders in July found that 18% of them were on a SVR.
14% said they 'keep meaning to switch but haven't got around to it' or haven't thought about it, while 15% do not think switching is worth the hassle.
But the SVR is often the priciest rate your lender will offer and it can change at any time.
The average SVR is now 8.18%, well above the average two-year fix (6.43%), five-year fix (5.97%) and two-year tracker (6.17%), according to Moneyfacts data.
Find out more:How much more will you pay with a SVR deal?
Those in two minds about switching off a SVR should be aware of the potential savings to be had by moving onto a fix or tracker.Our example compares the average monthly bill for someone with a £200,000 mortgage with 25 years remaining across four different types of deals.
There is a significant price gap, with the average five-year fix costing £283 less per month than the average SVR.
If the SVR were to stay at the same 8.18% rate for five years (which would be unlikely), it would cost £16,980 more over that five-year period compared with the average fixed deal.
Find out more:How to switch from a SVR mortgage
Usually, mortgage holders can switch from a SVR without too much hassle as there aren't normally any tie-in periods or exit fees.
Is a SVR mortgage ever a good idea?
In our survey, 37% of respondents on a SVR said they were happy with their current mortgage.
While the interest rates are currently sky-high, a SVR can prove to be beneficial in certain situations.
For one thing, they tend to offer more flexibility, which can be good if you're planning to remortgage or move house in the near future, as you're unlikely to face an Early Repayment Charge (ERC) - this is a penalty for repaying your loan before the end of your deal.
So, if you've got the cash to overpay or even clear your mortgage, transferring to your lender's SVR could prove useful as you'll be able to do so without having to pay a fee.
This is handy for those with a small amount left on their mortgage. For example, someone with £20,000 left could pay it all off in a lump sum - rather than continue to stretch out their mortgage repayment on a fixed or tracker deal.
You might also be banking on the chaos surrounding interest rates will calm down over the next few months and can afford to wait for deals to become cheaper before locking another one in.
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source https://www.which.co.uk/news/article/should-you-switch-from-a-standard-variable-rate-mortgage-afSbq4v7ihUT