Sharp rise in Co-op mortgage rateMove by ethical bank may hit borrowers hard
04 April 2012
The Co-operative Bank has become the latest mortgage lender to raise its Standard Variable Rate (SVR).
The rate will rise from 4.24% to 4.74% from 1st May 2012 - a hike of 0.5% overall. Around 54,000 Co-operative mortgage holders are likely to be affected.
The move will see the average Co-operative SVR payment rise by £15 per month - or £180 per year.
Co-op blames rising costs
The Co-operative Bank argues that the move has become necessary following an increase in the cost of providing funding for its mortgages, as well as changing circumstances in the overall mortgage market.
In particular it argues that because more customers are opting for longer-term, fixed-rate savings accounts (which usually pay higher rates of interest than other accounts) it is being forced to recoup these costs by charging more for its mortgages.
A rising trend
The Co-operative Bank is just the last in a long line of mortgage lenders to raise their rates in recent weeks. Clydesdale and Yorkshire Banks, RBS/NatWest and Halifax have already done so - and more lenders are expected to jump on the bandwagon.
However, the Co-operative's move has provoked particular criticism because its ethical banking policies have always been one of its major selling points. And many people feel that the latest rate rise, though not necessarily unethical, will hit many hard-pressed customers at a particularly bad time.
Mortgage holders are 'trapped'
This is because many mortgage holders are currently 'trapped' and unable to remortgage to better deals.
In some cases this is due to a change in their employment circumstances, or because they are in negative equity following the property price falls of recent years.
This week, the Financial Services Consumer Panel called for a new rule by the Financial Services Authority (FSA) to specifically protect borrowers hit by the recent hikes in SVRs.
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