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Despite the Bank of England holding the Base rate firm at 0.5% for a year and a half, mortgage lenders have begun to raise interest rates to borrowers. Ten buildings and societies and banks have already hiked their rates resulting in payment increases for hundreds of thousands of homeowners.
Despite interest rates remaining static for eighteen months, some lenders have begun to increase their Standard Variable Rates (SVRs) by as much as 1.5 per cent. Whilst SVRs are typically linked to movements in the Bank of England base rate, lenders have complete control over these rates and are able to alter them at any time.
It is estimated that lenders have so far earned over £10 million to date from raising their SVRs. Over three million borrowers have SVR mortgages, many because they have been unable to remortgage to another deal once their existing fixed or discounted deals came to an end.
Pressure on others
Experts are concerned that these increases will pressure other lenders into following suit. Skipton Building Society raised its SVR from 3.5 percent to 4.95 per cent in March, equating to a rise of £81.10 per month on a £105,000 mortgage over 20 years.
The discrepancy between the lowest and highest SVRs is wide, with the likes of C&G charging 2.5 per cent whilst the Chesham Building Society charges 6.45 per cent.
Stewart Hosie, a member of the Commons Treasury select committee, said, “It will strike the borrowing public as odd that they are being asked to pay increased rates when the base rate has remained static for over a year. Banks and building societies have a duty to explain to customers whey they are paying 3, 4 or 5 percentage points above the base rate.”