Many people shop around before choosing a fixed-rate mortgage for two, three, five, or even 10 years. Yet recent research has revealed those who do not bother to find another fixed-rate deal or mortgage provider when the term ends could be paying £400 or more extra per year.

Citizens Advice conducted research has revealed around 1.2 million people could get a better deal by shopping around once their fixed-rate deal ends. Their data has shown people who do not do this pay an average of £439 extra in mortgage payments each year by sticking with the standard variable rate. This is the rate the mortgage provider puts fixed-rate mortgage holders onto when their deals come to an end.

The average figure means some could well be paying more than this in a year. The actual amount paid depends on the specific rate and deal the lender provides. It does, however, show how much money could be saved by shopping around for another good deal once the current fixed rate ends.

A costly error

“Many people look for ways to save money on their monthly bills,” said Darren Pescod, CEO of The Mortgage Broker Ltd. “If they have gone from a fixed-rate mortgage deal to the standard variable rate of their lender, they could potentially save hundreds of pounds if they look for a better deal. This is particularly true given the low interest rates we still have at present.

“Plenty of people could miss out on another low interest rate for a fixed-rate mortgage if they do not switch when their deal runs out, before the base rate is increased. It is looking very likely this increase will happen soon, so it is worth exploring the options now if you know your fixed rate is about to end.”

A decade of waiting

The data released by Citizens Advice also revealed customers who are transferred to the SVR offered by their lender take about 10 years to switch to another mortgage product. Some may have taken out mortgages when the interest rates were much higher, and since the base rate has dropped to 0.25%, the SVR has resulted in lower payments anyway.

Clearly, there is room for mortgage holders to assess their options when they come to the end of a fixed rate deal. With plenty of appealing deals around now, it may well prove much cheaper to lock into a three- or five-year fixed-rate deal, as opposed to switching to the SVR offered by their lender.

“No one wants to spend time looking at mortgage rates,” Darren Pescod added. “But as the figures show, there is a lot of money to be saved. If customers take the time to look at the extra money they could be spending each year, they may feel more inspired to search for a better fixed-rate deal. Even at the average of £400 extra per year, that’s an extra £4,000 going to the mortgage company over a decade.”