SVR at 5.99 per cent may suit those with small balance

Andrew Hagger of Moneynet.co.uk looks at the situation for those approaching the latter stages of their mortgage term.

The low interest rate environment has led to some smaller building societies increasing the rate on their SVR over the last few months and in some instances these now stand as high as 5.99%.

Some people will be comfortable to remain on their lenders SVR whereas others may be biding their time before switching to the security of a new fixed rate product.

However, for those who purchased a property 10 or 15 years ago when the average price according to the Nationwide BS house price index was £77,968 or £51,084 respectively, some borrowers will be in the fortunate position of having a relatively small balance outstanding in comparison to typical loan requirements of today.

If for example you have a balance of £40,000 with 10 years remaining on the term you'll be paying around £443 per month at a 5.99% SVR.

But when you look at the rate and fee combinations available on fixed rate deals, you'll see that there's not really much of an incentive to switch with pricing as it currently stands.

However if you look at a larger balance, say £70,000 then it does make financial sense to switch.

Whilst an SVR touching six per cent seems high in the market at the present time, the current rate and fee combinations on fixed rate deals make sitting on the fence a sensible option for some borrowers.