The vast majority of mortgage borrowers will avoid a payment shock when the fixed-rate period ends and the mortgage reverts to a variable rate, according to Fitch Ratings.

The firm says that more stringent affordability testing since 2014 has reduced the potential for mortgage borrower payment shocks upon reversion to higher standard variable rates (SVR), alongside robust income verification, credit score checks and ease of refinancing.

Most borrowers do not pay SVR and 77% instead switch to a new product within six months of moving onto a reversion rate (2018 FCA market study) explaining high UK CPR rates (around 15%).

Borrowers subject to more rigorous affordability testing have become more resilient, also benefitting from access to low fixed rates, which have decreased markedly since 2008, while the average SVR has remained high, increasing the potential payment shock upon reversion and the incentive to re-mortgage.

However, heightened competition has compressed margins and Fitch concluded that lenders are increasingly focusing on their retention strategy for borrowers that are approaching reversion.