Why borrowers are not staying with Standard Variable Rates

I had a call from a journalist the other day regarding the results of a recent survey from Unbiased.co.uk. This survey found that only 27% of borrowers who reached the end of their fixed rate stayed on the Standard Variable Rate (SVR). Isn't this surprising he asked? Shouldn't the number be higher? I wasn't surprised, for a couple of different reasons...

Firstly, the SVR, while linked to the Bank of England base rate, is the lenders rate and therefore they decide what it will be. As I am sure you know from reading in the news over the last few months, most lenders have decided not to pass on the rate cuts the BoE implemented, therefore in many cases making the SVR unattractive for some borrowers. Time and time again I have found myself having to explain to an irate client why they are facing a rate of 4.84% when they reach the end of their fixed rate when the BoE rate is 0.5%. This rate incidentally, is what the Bank of Scotland has charged since pretty much since last February, ignoring all the subsequent rate cuts.

Another reason is that many people have become much more cautious since the credit crunch hit. Those who are on a variable rate are savvy enough to realise that the situation will improve - for example the Institute of Chartered Accountants in England and Wales recently found that confidence among business professionals has turned positive for the first time in two years, indicating the recession may be at an end. Rates will increase significantly and many borrowers now realise the need to fix into good rate for a longer period. Five year fixed rates have increased over the last two months as many lenders are realising this too.

If your fixed rate is coming to an end, now is the time to do something about it!

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