Mortgages more expensive following SVR increase
Mortgages are more expensive for one million homeowners after the Halifax, the Co-operative Bank, Clydesdale Bank and Yorkshire Bank all increased their standard variable rate (SVR) yesterday.
Many mortgages revert to the SVR when a fixed-rate deal comes to the end of its term.
Lenders are increasing their SVRs due to the higher cost of borrowing from European wholesale money markets, which makes it more expensive for them to fund mortgages.
The ongoing weakness in the UK economy and the eurozone debt crisis have also contributed to the changes.
The Halifax has increased its SVR from 3.5 per cent to 3.99 per cent, with mortgage repayments rising by up to £55 a month for 850,000 borrowers.
The Co-op Bank’s SVR has increased by 0.5 per cent to 4.74 per cent while Clydesdale and Yorkshire Banks’ SVR rate has increased from 4.59 per cent to 4.95 per cent.
The Bank of Ireland is also planning to increase its SVR later in the year.
Borrowers affected by the changes are advised to swap to a better deal, but with lenders tightening their borrowing criteria this could be difficult for many.
New mortgage rules will be introduced next year as part of the Financial Services Authority’s efforts to eliminate irresponsible mortgage lending and lenders are already preparing for the introduction of the new regulations.
It is estimated that one in 40 mortgage holders would no longer qualify under the new rules which will require lenders to ask more probing questions to ensure that borrowers will be able to repay their home loan.
Consumer group Which? is calling for banks do more to help customers who are struggling to pay their mortgages.
It also wants the new financial regulator, the FCA, to support consumers and stand up to banks.
The SVR increase is expected to leave 10 per cent of mortgage holders in the UK with insufficient funds to pay for everyday essentials.