Homeowners face 'financial shock' as mortgage costs could more than double overnight after banks ignore base rate cuts

Homeowners who secured five-year fixed mortgages at 1.70 per cent in 2019, paying £721 monthly, could now face payments of up to £1,478 if moved to the highest SVR of 8.99 per cent, new analysis shows.

Despite two recent Bank of England base rate cuts in August and November 2024, some high street banks have yet to pass on these reductions to their SVR customers.

Although the base rate currently sits at 4.75 per cent, the average SVR has reached 8.24 per cent. Current five-year fixed deals average 4.95 per cent, while two-year fixes are slightly higher at 5.09 per cent.

For a typical mortgage taken out in 2019 at £176,250 (75 per cent LTV), monthly payments would increase from £721 on the previous 1.70 per cent rate to £1,025 on today's average five-year fix, analysis by TotallyMoney has shown.

Those moving onto the average SVR would see payments jump to £1,389, while the highest SVR of 8.99 per cent would push payments to £1,478.

Some of the UK's biggest high street lenders - such as Virgin Money - are maintaining SVRs as high as 8.99 per cent.

Lloyds Banking Group, Bank of Ireland, TSB and Metro Bank all have high SVR'S over eight per cent despite the November base rate cuts.

The lack of response to base rate cuts by some banks has drawn attention, especially as the financial regulator has been urging lenders to act in their customers' best interests.

"Each day, more than 4,000 homeowners face a fresh financial shock when their existing cheap-rate mortgage offer comes to an end and they face finding a new deal with higher interest payments, or being put onto their bank’s SVR," analysis warned.

Alastair Douglas, CEO of TotallyMoney, said: "If your existing cheap mortgage offer is coming to an end, then it might be worth shopping around and looking for a new deal. You can usually do this up to six months in advance.

"What's disappointing is that despite two base rate cuts, some banks still haven't passed the benefits onto homeowners on the standard variable rate."

He urges struggling homeowners to contact their lenders promptly, noting they may offer options like reduced monthly payments, interest-only agreements, or extended terms.

Douglas emphasises these changes won't impact credit scores but warns they could mean higher long-term costs.

After five years of mortgage payments, a homeowner with an initial £176,250 loan would have a remaining debt of £146,710 with 20 years left on their term.

At the current average SVR of 8.24 per cent this would result in monthly payments of £1,249.

The increases mean many households will see their annual mortgage costs rise from £8,652 to as much as £17,736