Anyone With Mortgage Rate Agreements Coming To An End Should Consider What Is To Be Done

8th November 2022

The Financial Conduct Authority (FCA) has identified the number of people with reversion rate mortgages and those coming up to dates for reversion to market rates.

Summary
1.1 This note is a follow up to our recent update on switching in the mortgage market. It describes the approach taken to reach the findings provided in the update as well as more in-depth analysis of switching in the mortgage market. In line with the update, the analysis presented here reflects the mortgage market up to the end of 2021. This note does not contain analysis on changes in the mortgage market since that time.

1.2 We present an update on the findings in the Mortgage Market Study (the MMS) on the number of mortgages on reversion rates and, of those, the number of mortgages where borrowers could save money from switching. Our key findings are:

 Since the time of the market study (2016 H2) the number of mortgages on reversion rates has fallen considerably. The number of mortgages on reversion rates for longer than 6 months has fallen to 1.0m as of 2021 H2 (the MMS found around 2 million mortgages with active lenders on reversion rates throughout the second half of 2016).

 Of these, 150,000 mortgages are near term and 70,000 mortgages are in
payment shortfall and would not be able to be switched on to a new deal.

 The number of mortgages on reversion rates where borrowers would save money by switching has also fallen, as of the remaining 780,000 mortgages, we find that 370,000 would save money by switching and that 190,000 would be unlikely to save money by switching as of 2021 H2 (see chart below). In contrast, the MMS
found at least 800,000 where borrowers would save money by switching in 2016

 We estimate that there are 370,000 mortgages where borrowers could save an average of £1,240 a year for 2 years by switching to a 2-year fixed rate with their existing lender.

 Those who we estimate would save, would not all save equally. We estimate that around 110,000 would save less than £500 a year for 2 years, 110,000 would save between £500- £1,000 and 150,000 would save over £1,000 a year for 2 years.

 There are 220,000 mortgages where we do not have complete information to enable us to determine whether borrowers would benefit from switching. This is significantly lower than the MMS found, as the MMS identified 450,000 mortgages from the assessment where we did not have enough data to assess whether
borrowers would save money by switching or there was no internal switching option.

Read the full report HERE
Pdf 23 pages

Note
A reversion rate is the interest rate that your mortgage 'reverts' to after your fixed rate mortgage period comes to an end.