Cashpoint

Santander is launching a mortgage Follow-on Rate to which borrowers will move when their deal expires.

People taking out loans from next Tuesday will automatically end up on the new FoR – a variable rate that tracks 3.25% above the Bank of England base rate (currently 0.5%, so a rate of 3.75%) – when their deal ends.

That’s instead of going on Santander’s Standard Variable Rate (currently 4.75%).

Yet offering an FoR and SVR adds yet more confusion. Lenders hope homeowners do nothing when their deal ends so they can cash in. While Santander’s FoR is 1% cheaper than its SVR, there are better deals around. Those with a 35% deposit/equity can get a 1.24% two-year fix from Yorkshire Building Society. On 10% deposits, there is Principality Building Society’s five-year 2.55% fix.

Andrew Hagger of personal finance site Moneycomms.co.uk said: “A bit of legwork could save thousands of pounds.”