Clydesdale and Yorkshire Banks are the latest mortgage lenders to announce an increase in their Standard Variable Rate (SVR).
Residential mortgage customers will be hit by an SVR hike from 4.59% to 4.95%, an increase of 7.8%.
Mortgage SVR increases hit thousands of borrowers
The rises will take affect on 1st May 2012, and will hit around 30,000 mortgage customers. The banks stress that mortgage borrowers affected will see an average increase in their repayments of less than £30 per month.
They have also said they will waive their usual mortgage exit fees until July 31st, making it easier for customers who choose to remortgage to other lenders as a result of the hike.
Halifax and RBS increase mortgage SVRs
Clydesdale and Yorkshire Banks are just the latest of several mortgage lenders who have announced increases in their SVRs.
In recent days Halifax, the UK’s biggest mortgage lender, announced that it will increase its SVR to 3.99% from 1st May. The change (up from 3.50%) is expected to affect around 850,000 customers, potentially increasing individuals’ mortgage payments by hundreds of pounds per year.
RBS has also decided to increase rate on two of its mortgage products – a move that affects around 200,000 customers. And last week, Santander increased rates for new customers on certain products by 0.1%.
Rising Libor increases mortgage SVRs
All the lenders above have given similar reasons for raising their rates. They argue that the Libor rate (the average interest rate that the biggest London banks charge when lending to each other) has risen because of the crisis in the eurozone.
This makes it more expensive for mortgage lenders to borrow money – and the lenders are now passing on the extra cost to their customers, by raising their SVRs.
Mortgage rates – the lenders’ double standards
This argument would seem to make sense. However, there is evidence that some mortgage lenders may be exercising double standards, having not originally and fully passed on the cuts on the base rate.
When Which? looked at mortgage SVRs in July last year, we found that 95% of lenders had failed to fully pass on cuts in the base interest rate to their SVR mortgage customers.
From September 2008 to March 2009, the base rate fell from 5% to 0.5%. However, out of the four biggest banking groups, Cheltenham & Gloucester and Lloyds TSB Scotland were the only lenders to pass on the full cut.
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