Bor­row­ers feel the pain as rate rise hits home

The Daily Telegraph - Your Money - - FRONT PAGE -

Mort­gage cus­tomers can save thou­sands of pounds by ditch­ing sky-high stan­dard vari­able rates, writes Adam Wil­liams

Home­own­ers face higher mort­gage bills from to­day as banks pass on in­creased in­ter­est costs to their stan­dard vari­able rate (SVR) cus­tomers fol­low­ing the Bank Rate rise last month. Cus­tomers with Bri­tain’s big­gest mort­gage lenders – in­clud­ing Bar­clays, Hal­i­fax, HSBC, Lloyds, Na­tion­wide and NatWest – have been hit with an SVR in­crease of 0.25 per­cent­age points.

Bor­row­ers are placed on a lender’s SVR once their ini­tial mort­gage deal ex­pires, mean­ing mil­lions of home­own­ers will have to con­tend with higher bills un­less they move to a cheaper fixed-rate deal.

A bor­rower can save thou­sands of pounds by switch­ing, ex­perts said. Yet while most ma­jor banks have in­creased rates to­day, cus­tomers of some high street brands are still in limbo. Lenders such as Vir­gin Money and Not­ting­ham Build­ing So­ci­ety are yet to an­nounce their plans, more than four weeks af­ter the Bank Rate rise.

As well as ex­ist­ing bor­row­ers, new cus­tomers will also be neg­a­tively af­fected by in­ter­est rate rises. Re­stric­tive mort­gage rules mean that cus­tomers must now prove they can af­ford to pay in­ter­est rates of more than 8pc in some in­stances, even if their mort­gage rate is fixed at less than 2pc. Bor­row­ers can use a loop­hole in the rules and avoid this strin­gent test by tak­ing out a long-term fixed-rate mort­gage, which negates the need for a “stress test”.

Many home­own­ers have al­ready taken ac­tion to lock in a low mort­gage rate. Bar­clays told Tele­graph Money that it saw a 43pc in­crease in mort­gage ap­pli­ca­tions the week af­ter the Bank Rate an­nounce­ment com­pared with the av­er­age of the pre­vi­ous two weeks.

Hit­wise, a search en­gine mon­i­tor­ing ser­vice, recorded a 27pc rise in con­sumers search­ing for cheaper mort­gage deals in the two weeks af­ter the an­nounce­ment, rel­a­tive to the two weeks be­fore.

Mark Har­ris of SPF Pri­vate Clients, a mort­gage bro­ker, said SVR bor­row­ers could save al­most £6,000 a year by switch­ing. He gave the ex­am­ple of a cus­tomer with Coven­try Build­ing So­ci­ety, which has in­creased the in­ter­est rate on its stan­dard vari­able mort­gage from 4.74pc to 4.99pc. A bor­rower with a £300,000 mort­gage will see their monthly pay­ments in­crease by £43 from to­day, equiv­a­lent to £516 a year.

Mr Har­ris urged bor­row­ers to switch to a cheaper fixed-rate mort­gage. As well as negat­ing the im­pact of the Bank Rate rise, this will pro­tect home­own­ers against fu­ture in­creases dur­ing the term of the deal.

“With two-year and five-year fixes still be­low 2pc for those with sig­nif­i­cant eq­uity in their homes, there are some very com­pet­i­tive rates still avail­able,” Mr Har­ris said. “If the bor­rower on Coven­try’s SVR switched their £300,000 mort­gage to a fiveyear fixed rate from HSBC at 1.89pc with a £999 fee, they would re­duce their monthly pay­ment to £1,256, sav­ing £496 a month or £5,952 a year.”

Most of the ma­jor banks have raised their SVRs to­day. Cus­tomers on Hal­i­fax or NatWest SVRs will see their rate rise by 0.25 per­cent­age points to 4.24pc. Bor­row­ers with HSBC will pay 4.19pc from to­day while Lloyds and Na­tion­wide cus­tomers will be charged 4.24pc or 2.75pc, depend­ing on when they took out their loan. Bar­clays has raised its SVR to 5.24pc.

Al­though smaller lenders’ SVRs were al­ready higher than those of main­stream banks, their cus­tomers also face in­creased rates. Kent Re­liance will now charge bor­row­ers 6.33pc while at Manch­ester Build­ing So­ci­ety the SVR has risen to 5.74pc.

At least these cus­tomers know how much they are pay­ing. Some large lenders have yet to tell cus­tomers

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