A single customer paying the higher standard variable rate (SVR) of their existing mortgage lender unnecessarily is one customer too many. Unfortunately, it is a scenario that is all too common and therefore enough reason to look at your mortgage again.
So, what is a standard variable rate?
The SVR is the go-to rate offered by a lender to which a mortgage defaults at the end of the initial fixed, tracker or discounted deal. Generally, it comes about through a lack of action when a customer is prompted, or the customer being unaware of the process. Whilst in some cases at higher loan to values, this can lead to a reduction in the interest rate charged, in the majority it leads to an increased rate and higher subsequent monthly repayments.
The SVRs of the lending institutions look to be on the rise in light of the current turbulence being felt within the economy and lending markets. As of September 2022 the average SVR was 5.06%, increasing from 4.91% in June 2022* and there is potential for this to increase further in the coming months; leading to uncertainty and possible instability of a household’s budget. Looking to options secure a deal is important in the best of times, but even more vital in the current high interest environment we find ourselves in.
Gone are the days where you should rely on your existing lender to offer you the best deal possible. Some even offer higher rates than they would offer new customers. We suggest reviewing a mortgage deal four to six months before it comes to an end to offer plenty of time to secure the best rate possible.
An employee of a bank can only offer deals from their own range, and so more and more people are forming relationships with a broker local to them.
At David Williams IFA Mortgage & Insurance Services, we not only compare interest rates between products, but also take the extra step of calculating the amount of capital remaining after an initial deal to ensure we are truly recommending the most viable option.
Overall, our aim is to create a full understanding of a customer’s situation and partner this with our intimate knowledge of lenders’ criteria; to help not just in one instance, but for every mortgage need that comes up in their lives. We have a specialist team that also deals with insurance, so we can save customer’s money as well as the time and hassle of them having to provide their personal information again and again.
*Money Facts, 22/09/2022
*Money Facts, 20/06/2022
Review your protection!
Reviewing your protection might seem a simple concept however, it can hold a whole host of complexities meaning you may need to seek advice. A review of your policies is important to ensure that you and your family are correctly protected, whether that be with life insurance, critical illness cover, or income protection. It may be that you have taken a new mortgage, your borrowing has increased or perhaps there’s been an addition to the family, a change in job or divorce. In all scenarios, this should prompt a review.
Ordinarily, financial advisers will review protection policies every two to four years. A common perception among consumers when reviewing insurance policies is an expectation of an increase in their monthly spend, but this is not always the case.
Maintaining regular reviews of your insurance policies is an absolute necessity. This is an ever-changing industry with new and improved contracts being brought to the market to coincide with developments in medical practice. Providers are in constant competition with one another to be the most comprehensive; this leads to a steady introduction of new and improved terms and conditions, leaving historic policies out of date.
Place your insurance in trust
Another crucial reason to review your protection policies is to ensure your plans are held in trust. Not only does it allow you to nominate someone to oversee your affairs and avoid probate delays, but it also removes the proceeds from your estate. In doing so, your insurance does not contribute towards a potential inheritance tax liability. Insurance policies are not usually subject to tax, but if your estate is valued at higher than the nil rate band for IHT purposes, your beneficiaries may be subject to a 40% tax bill.
Take advice on your protection
Speaking with an adviser will give you the peace of mind that your plan is suitable for your needs. We have come across new clients who have previously gone direct to an insurer or a non-advisory third-party firm and have subsequently encountered difficulties at claim stage.
Non-advised firms and insurance companies are unable to provide advice about which plan is more suitable or whether a health concern needs to be disclosed, so it falls to the client’s judgement.
David Williams IFA Mortgage & Insurance Services are committed to providing consumers with the right policy for them and their family. Have you taken out a plan without advice? Is your insurance in trust? Or have you simply not reviewed your plan recently? Our team of experts are always on hand to help.
We use our expert knowledge of the market and status as an independent mortgage broker to access thousands of deals through a plethora of different banks and building societies.
David Williams IFA Mortgage & Insurance Services Ltd (FRN:597007) is an appointed representative of David Williams IFA Ltd (FRN:530750) which is authorised and regulated by the Financial Conduct Authority.