Variable mortgage rate customers squeezed by lenders, says Which?Most lenders failed to pass on full base rate cut

22 June 2011

A terrace of houses

Thousands of homeowners could struggle when rates rise

95% of mortgage lenders failed to fully pass on cuts in the Bank of England base rate to their standard variable rate (SVR) customers, according to new research by Which? Money.

And, with many borrowers trapped on SVR mortgages, as they no longer have enough equity in their homes or a high enough income to switch to a better deal, a rise in interest rates could leave thousands of households in financial difficulty.

A 1% increase to their interest rate would add over £50 to the monthly repayments of someone with a £100,000, 20-year mortgage.

More than a fifth of lenders have increased their SVR since the base rate hit an all time low of 0.5% in March 2009.

Cheltenham & Gloucester and Lloyds TSB Scotland were the only lenders from the four biggest banking groups to pass on the full cut. See the table below for the current standard variable rates of the big mortgage lenders.

Highest interest rates

At 6.08%, KRBS - formerly Kent Reliance Building Society - has the highest SVR on the market at more than 12 times the base rate. The five other direct lenders with the highest SVRs are all building societies.

The average SVR is now 3.48% above the base rate, compared with 1.95% in September 2008.

If you are struggling to pay your mortgage, visit our guide to avoiding repossession. 

Visit our mortgage deal finder to see if you could save money by switching your mortgage.

Big mortgage lender rates 

Big lenders' standard variable rates
Northern Rock4.79%b
Cheltenham & Gloucester3.99%c
Nationwide BS3.99%e
First Direct3.69%

Table notes

a. Some customers pay lower rates linked to the base rate
b. Some customers qualify for a ‘loyalty rate' of 4.54%
c. Customers who applied for mortgages before 1 June 2010 pay 2.5%.
d. Customers who took out a mortgage before 1 January 2011 pay 3.5%
e. Customers who reserved mortgages before 30 April 2009 pay 2.5%

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