Skipton Building Society has announced plans to increase the standard variable rate (SVR) on its mortgages, blaming ‘exceptional market conditions’ for the leap.
Skipton had previously operated a ceiling which meant that the majority of borrowers with SVR-linked accounts would not pay more than 3% over base rate, currently 0.5%. This ceiling has now been removed, with the building society’s SVR leaping to 4.95% from 1 March.
OFT and FSA should ensure consumers are protected, says Which?
Responding to the increase, Which? chief executive Peter Vicary-Smith says: ‘We can’t see any justification for this unexpected hike in Skipton’s SVR, and are extremely disappointed by this decision. Sadly, a number of their customers will have no option but to stay on this SVR, facing a significant rise in their mortgage repayments.
‘This move should serve as a warning to anyone with a mortgage that is linked to a bank or building society’s SVR. We urge the OFT and the FSA to ensure that consumers are properly protected and in the meantime, strongly recommend that people check with their lender to see when and how their mortgage rate can be varied.’
‘Exceptional conditions’ behind the increase
The exceptional market conditions referred to by Skipton are:
- Base rate is less than or equal to 2.7%; or
- Base rate minus the UK average branch instant-access savings rate is less than or equal to 2.5% for each of the three preceding months.
Skipton Group Chief Executive David Cutter explained: ‘Throughout 2009, the Society operated, by any historical measure, on an extremely low standard variable rate (SVR), which helped our borrowers through the recession. At the same time, we tried to protect our savers […] by offering them consistently high returns relative to an extraordinarily low base rate of 0.5%. […] With base rate expected to remain low for some considerable period, we have reviewed our low SVR.
‘UK savers have been the forgotten victims of the credit crunch. But their money is now in hot demand as banks continue to reduce their reliance on the wholesale markets. This, coupled with the rates payable by the Government’s NS&I, has driven up the cost of retail funding to an unprecedented level relative to mortgage rates.’
Skipton has pledged to re-introduce the SVR ceiling in the future, once these exceptional circumstances no longer prevail. Meanwhile, letters are being sent to all affected customers this week. The increase will also apply to the Society’s specialist lending subsidiary, Amber Homeloans Limited.
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