An estimated 370,000 mortgage borrowers could save an average £1,240 per year for two years by switching to a two-year fixed rate with their existing lender.

New analysis by the FCA revealed that the number of mortgage borrowers not switching their mortgage deal when they could save money by doing so has declined significantly since 2016, down from 800,000 mortgages.

Mortgage borrowers, including those who do actively switch their mortgage, are facing increasing pressure from rising living costs, and around half of mortgages currently arranged on fixed rates will expire in the next two years.

The FCA has estimated that around 110,000 borrowers would save less than £500 a year for two years, 110,000 would save between £500 and £1,000 a year for two years, and 150,000 would save over £1,000 a year for two years.

“Given the rising cost of living, it’s important that borrowers consider their options and switch if they can where it meets their needs and circumstances and saves them money,” the FCA stated.

“Lenders and mortgage intermediaries should support customers to do this and we recently asked lenders to consider what more they can do to encourage mortgage borrowers to think about switching to a less costly option where that is available.”

Many borrowers have paid comparatively low interest rates in recent years, on both fixed and variable rates, and the FCA highlighted that most are likely to face increasing mortgage costs, as base rates and the cost of new fixed or other incentivised deals climb.

According to the regulator’s most recent analysis, data from the second half of 2021 shows that 6.3 million mortgages (74%) are on fixed rates, typically fixed for between two and five years. Of the 2.2 million mortgages (26%) on variable rates, around half of these are on discounted variable or tracker rates, while half are on reversion rates.

The FCA also highlighted that not all borrowers on a reversion rate who can switch would save money by switching, with around 190,000 borrowers estimated to be in this group.

“We will continue to monitor the market, particularly given the impact on borrowers of increasing mortgage rates and the rising cost of living and consider what further steps we may need to take,” the FCA added.

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