A number of mortgage holders who have seen their income fall due to the pandemic plan to roll onto their lender’s Standard Variable Rate (SVR) rather than remortgage

Research from Legal & General Mortgage Club found that a third – 32% – of borrowers who have been negatively impacted by Covid say they are likely to move onto their lender’s SVR rather than remortgage – potentially paying £2,500 more annually as a result.

More than half – 52% – of borrowers who have seen their income fall are concerned that lenders will now be scrutinising their finances in more depth compared to pre-Covid levels.

Half – 50% – are concerned that their decision to take a payment ‘holiday’ will affect their future mortgage options, and two thirds – 67% – believe it will be harder to get a mortgage when furloughed.

Kevin Roberts, director, Legal & General Mortgage Club, said: “While the coronavirus crisis has undoubtedly affected people’s finances in different ways, those who have seen their incomes drop will likely be finding this a particularly challenging time so it’s vital they avoid falling onto a reversion rate and paying more when there are other affordable options available.

“Covid-19 may have dampened the confidence of a large number of borrowers wanting to lock into a new rate, yet the cost of not exploring their refinance options could be significant.

“Even for those borrowers who have seen a reduction in income, there may well be products available that would save them money in the long term when compared to their lender’s SVR.

“There are still thousands of great fixed rate-deals available, including furlough-friendly mortgages for those who have or continue to draw support from the government’s Job Retention Scheme.

“The UK also has a thriving specialist lending sector designed to help borrowers with complex circumstances, from the self-employed to those who might have experienced a credit blip, many of whom can only be accessed through speaking with an independent adviser who could help these borrowers to save thousands of pounds in their mortgage repayments.”

Some 700,000 borrowers will reach the end of their two and five-year fixed rate mortgages in 2021.

Even among those who do not plan to revert to their lender’s SVR, over half – 52% – are more likely to stick with their current lender when looking for a new product, with over a third – 37% – thinking this will be the easiest way to secure a new deal.