Santander cuts highest rate – but no joy for ‘mortgage prisoners’

Santander has lowered its highest lending rate in a radical overhaul of how it charges mortgage customers. Borrowers coming to the end of their existing fixed-rate deals are normally moved to the lender’s “standard variable rate” (SVR).

For Santander this currently stands at 4.74pc.

However, these borrowers will now be moved to a “follow-on rate”, which is set at 3.25 percentage points above the Bank of England’s Bank Rate, currently 3.75pc. Someone with £150,000 outstanding will save £83 a month on their mortgage payments.

Graham Sellar from Santander said: “It became obvious to us that customers didn’t really understand what an SVR was, but people seem to know the Bank of England base rate.”

Anyone taking out a loan after Jan 23 this year will automatically be moved to the new rate at the end of any fixed-rate deal.

Most borrowers who are currently paying the SVR will be offered the chance to switch immediately. However, anyone who has missed a payment or been in arrears in the past 12 months will remain on the SVR.

Aaron Strutt of brokers Trinity Specialist Finance said the new rate would prove appealing for customers who had run into financial difficulties and were unable to remortgage.

However, he added that customers should always start researching new deals three months before their fixed-rate deal expired.

Some experts predict as many as three rises in the Bank Rate this year, which would increase Santander’s new tracker to around the current level of its SVR. Santander’s army of so-called “mortgage prisoners” – those who are stuck on the SVR and unable to switch to a better deal – could miss out as a number are in arrears or have missed payments.

Tim Coates, 45, is one such mortgage prisoner who has been paying Santander’s highest rate for eight years.

He said the SVR now seemed to be a “punishment rate” for those who had missed a payment or were in arrears, adding: “It’s another kick in the teeth for mortgage prisoners.”

Santander has cut its highest rates for most borrowers