Who pays SVR??

Jolanta_Nowak

From time to time I read that there are considerable numbers of people who are rich or foolish enough to just stay with the same lender at the end of the inducement/tied period.

This gives rise to an interesting thought - are these people, in effect, subsidising the lower rates which the more 'active' borrowers are able to take? Are there any figures for how many people are paying out at SVR rates?

The further thought occurs that, if enough of these people can be motivated by sites like Martin's to start switching lenders. said lenders might become less interested in offering the inducements!

Charlton_King

My guess is it's a distinct minority but yes, you do hear of people who are happy to pay through the nose. This must be one of the greatest wastes of dosh going.

elvis_girl

I'm stuck with SVR due to a problems remortgaging, but I don't think I could be described as rich and/or foolish!

dmg24

When my fixed rate comes to an end I may go with the SVR for a while, as I intend to sell up within the next year. I am limited as to the remortgage products available to me (because I am now a full time student, though I still have an excellent credit rating and have never missed a payment), and even a year on the SVR, would cost me less than a new discounted rate plus product admin fee plus early repayment charge.

I imagine that in the majority of cases, it is down to not realising that other choices are available. However, there are instances where the SVR may actually be a better option than taking on a discounted product.

Creditcardkid

I would guess that it would be mainly those who have no knowledge of money matters and those with bad credit. If another mortgage company won't touch them (few missed payments etc) then they would be stuck.

Just an (un)informed opinion.

Steve

MarkyMarkD

There are several reasons for being on SVR, some of which have been mentioned above and some of which haven't.

- People whose mortgage is less than £25k (typically) or £50k (for some lenders) can't switch products with their existing lender and face a small selection of lenders who will take them on. The costs of remortgaging are disproportionately high for those with smaller mortgages, in any case.
- People may wish to be able to repay their mortgage instantly without any penalties. Few incentivised products allow this.
- People whose financial circumstances have changed since they took out their original mortgage may be unable to remortgage. This doesn't necessarily mean bad credit - one partner may have lost their job, or be unable to work due to disability, illness, pregnancy or whatever.
- People may have different sub-accounts on their mortgage with different tie-in dates, and find it cheaper to keep one sub-account going on SVR until they can switch products or remortgage the whole lot.
- Further advances are typically made at SVR.

Lenders do quote the proportion of borrowers on SVR. It is a fastly diminishing figure. If I recall A&L recently stated that something like 10% of borrowers were currently on their SVR.

Jolanta's point is absolutely correct. For years, the borrowers on SVR have been paying for incentivised offers for other customers. The more that the proportion of borrowers staying on SVR declines, the less money the lenders make and the less money that's available for subsidising the more astute borrowers.

It has been pointed out in other threads on MSE that whilst money-savers benefit in the short term from following MSE advice, they will only benefit from doing so until the overall cost of them doing so catches up with everyone! Indeed, money-savers can arguably only benefit whilst there are non-money-savers paying over the odds.

The idea that money-savers just take money from "institutions" is a bit of a fantasy IMHO.

Even more strangely, MSE's attitude towards bank charges is entirely at odds to its attitude to everything else. For bank charges, the idea that the astute are subsidised by the less astute is seen as immoral; for everything else, the MSE approach is that it's fair play for the astute to get what they can and to let the less astute subsidise them.

doingwhatican

I have been on SVR for a year or so. My mortgage is less than 28k now and it is silly for me to pay 1k arrangment fee or something around that to get a measly 1% or so off my mortgage. I am not tied into any deal, and I do not have to pay any penalties for paying my mortgage off early. I am over paying by quite a bit nd have been for several years.
So yes I must be rich and foolish with a bad credit history to be on a SVR.

elvis_girl

Touche doingwhatican! I am also none of those things (have never missed a payment for anything) but I don't want tied in to anything so I'm still looking round for the right deal.

roswell

Im on SVR and will remain so, my mortgage is sub £14500 there is no savings to be made by changing in my case, but i did good and got a offset from the start so my real rate is 0%, people with low martgages will be stuck on svr as lenders arent interested in small numbers and the costs oc moving can exceded the savings to be made.