Over a million consumers will face a £300m hike in mortgage repayments over the next year as lenders increase Standard Variable Rates (SVR) and variable rates on home loans, according to new research from Which?.
The consumer champion found that 70% of mortgage-holders are concerned about an increase in interest rates, while some 14% say they are already struggling with repayments. The greatest impact of these latest rises will be felt by ‘mortgage prisoners’ who are unable to move to another provider.
Mortgage rate rises to cause consumer struggles
Some 75% of mortgage-holders told Which? that they would be affected if their repayments increased by £50 a month, with 41% saying they would need to cut back on regular spending, 20% would need to reducing savings and 11% would not have enough for essentials.
An increase of £100 a month would see 20% of mortgage-holders not having enough for daily essentials like food and 11% being unable to pay their mortgage. Consumers also highlighted the emotional impact of increases in mortgage repayments, describing them as ‘devastating’ and ‘a disaster’.
Who is increasing mortgage rates?
Five lenders have announced increases to SVRs and variable rate mortgage products. The Cooperative Bank, Halifax, Clydesdale and Yorkshire Bank increases in SVRs will take effect on 1 May 2012.
Bank of Ireland has announced an increase in its SVR which will take effect in two stages on 1st June and 1st September. NatWest/RBS increased its variable rates for its offset mortgage customers on 1st March and will be increasing variable rates for its One Account customers on 1st May.
|Who is increasing mortgage rates?|
|Lender||Rate increase||New rate/SVR||Date comes into force||Borrowers affected|
|Bank of Ireland||+1.5%||4.49%||1st June / September 2012||100,000|
|Clydesdale/Yorkshire||+0.36%||4.95%||1st May 2012||30,000|
|Co-operative Bank||+0.5%||4.74%||1st May 2012||54,000|
|Halifax||+0.49%||3.99%||1st May 2012||850,000|
|NatWest/RBS offset mortgage||+0.25%||4.00%||1st March 2012 a||100,000|
|One Account||+0.25%||3.90% – 4.75%||1st May 2012 b||100,000|
- The rate is a variable rate and increased with effect from 1st March for RBS/Natwest offset products and with effect from 1st May for One Account mortgage customers (Virgin One, Natwest One and Direct Line One).
- The rate for the One account is a variable rate and depends on the ‘Facility to Value’ – the total amount offered in relation to the value of your property. These range from 3.90% for less than 50% FTV to 4.75% for over 95% FTV.
Action is needed to help struggling mortgage customers
Which? chief executive, Peter Vicary-Smith said: ‘Our advice to anyone struggling with their mortgage repayments is speak to your lender straight away. It is encouraging that a third of people we spoke to had approached their lender, but, worryingly, in one in five cases, they said their lenders offered no help at all.
‘This is just not good enough and we want to see banks do more to help their customers who are struggling. These SVR rises are the consequence of the lack of competition in the market and the failure of the Government to take action to promote competition.
‘This is why the new financial regulator, the FCA, needs to be a watchdog not a lapdog. It must stand up for consumers and stand up to the banks.’
Watchdog not Lapdog campaign
Which? wants lenders and the Financial Services Authority to do more to protect consumers against unjustified interest rate rises and ensure that consumers are offered the ability to fix their payments at a reasonable level. Lenders must not be allowed to take advantage of borrowers who are unable to move lender.
Find out more by read more about our Watchdog not Lapdog campaign.