Bank of Ireland raises cost of mortgages

| March 7, 2012 | 0 Comments
Bank of Ireland raises cost of mortgages

The Bank of Ireland has become the latest lender to increase the standard variable rate (SVR) on its mortgages.

Around 100,000 UK customers will be affected when the bank increases the SVR from 2.99 per cent, to 3.99 per cent in June

There will be a further increase in September, when the SVR will rise to 4.49 per cent.

This will mean that customers with a £100,000 repayment mortgage on an SVR rate will have to pay an extra £81 per month.

It is the first time the Bank of Ireland has increased its SVR since August 2007.

Several lenders have increased their mortgage rates following an increase in the cost of mortgage funding.

Traditionally, lenders set their SVR rate at around 2 per cent above the Bank of England base rate which has been around 0.5 per cent for the past three years and is likely to remain at this low level for the foreseeable future.

Rock bottom interest rates have meant good deals for mortgage holders, but Libor, the rate at which banks lend to each other, recently rose to its highest level for two years, prompting the increase in SVR rate.

The Halifax is increasing its SVR from 3.5 per cent to 3.99 per cent from 1 May while the Royal Bank of Scotland is increasing its SVR mortgage rates from 3.75 per cent to 4 per cent.

Mortgage experts are advising borrowers to review their mortgage options and look around for better deals.

A recent survey by Legal & General Mortgages found that 35 per cent of borrowers in the UK prefer fixed-rate mortgages to SVR mortgages because of the added security of a fixed-rate product.

Of this 35 per cent, 30 per cent said they would pay between £26 and £50 extra for a fixed-rate product, 24 per cent said they would pay between £1 and £25 more, 13 per cent would pay over £51 and 6 per cent would pay over £70 more.

The MortgageMood survey also found that 55 per cent of respondents currently on a SVR mortgage are still happy with their choice.

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