19 January 2018
SANTANDER REPLACES SVR WITH CHEAPER FOLLOW-ON RATE
Santander has launched a second standard variable rate (SVR) which will apply to new mortgages. The follow-on rate – charged when borrowers come to the end of a fixed or discounted deal – will track at 3.25 per cent above Bank of England Base Rate, giving a pay rate of 3.75 per cent. This is much cheaper than the current SVR, which is 4.74 per cent.
Santander’s move is great news as the new follow-on rate is much cheaper than the existing SVR. A Santander customer with 20 years left on a £250,000 mortgage on the new rate of 3.75 per cent would pay £1,482 per month, compared with £1,614 on the same loan on the old, higher rate, so it’s a considerable monthly saving.
It brings Santander into line with its competitors and actually undercuts some other reversionary rates, such as those from Halifax and Nationwide, who charge 3.99 per cent. However, it is a shame that Santander is not moving all of its customers over to the new rate automatically. This would have been a nice gesture and may have eased some of the confusion around having different reversion rates for existing and new customers. One could also see how ‘loyal’ customers who have been with the lender for a few years might feel a bit put out.
No matter how good the new reversion rate is, it should not stop borrowers from shopping around for a new mortgage when they come to the end of a fixed or discounted deal, ideally seeking advice from a mortgage broker.