Mortgage Lenders increase Standard Variable Rates

It's been flagged for some time now but this weekend it finally happened. Following several months of an increase in LIBORs in the interbank market, the first Lenders have bitten the bullet and passed these increase on to their variable rate customers linked to the Lenders own Standard Variable Rate (SVR). Effective May 1st, Halifax have said they will increase their SVR by 49bp to 3.99% and RBS Offset and One Account holders will also see their SVR rise by 25bp to 4.00%. A Lender's SVR is the rate against which they peg most of their variable mortgages. back in the good old days when funding markets were more normalised, the SVR generally moved in line with the Bank of England Base Rate though often a little pre-emptively (usually in the case of rate rises!) or with a lag (unsurprisingly when rates were cut!) of a few weeks here or there. Nowadays with the interbank lending market quite stagnant and no one quite sure where the exact medium term borrowing rates are, other than the occasional funding operation from the ECB, the SVR moves more independently from the Bank of England base rate. For some Borrowers this will be an unwelcome surprise. As the Bank of England base rate has stayed at 0.5% - and is forecast to remain there until 2015/6 - they may have thought they were fairly secure in their mortgage payments but the devil is in the detail and while those with mortgages linked directly to the BoE base rate will sleep soundly, those on the Lender's own SVR are in for a surprise. A 25bp rate increase on a £100,000 mortgage of 15 year term will cost about £24 extra per month. Nevertheless, this does present a small boon to the mortgage broker community who can now step in to help clients find the best remortgage deals to mitigate these rate increases. At Choice Loans we can refer you to one of our panel of Mortgage Advisers who can assist you with your options. Just give us a call on 0845 126 0350