UK’s largest lender increases standard variable rate by 0.49% – despite base rate staying steady.
Halifax is set to raise the cost of mortgages for customers on its standard variable rate (SVR), despite it being three years since the last movement in the Bank of England base rate.
The UK’s largest lender, part of the Lloyds Group and partially owned by the taxpayer, will increase its SVR by 0.49% to 3.99% on 1 May, a move that will affect 850,000 customers who have all or part of their borrowing on that rate. A customer with an average balance of £67,500 will typically see their repayments increase by £16.40 a month, while someone owing £100,000 will typically pay £24.30 more each month.
The announcement came just days after Halifax wrote to 40,000 customers to tell them it was adjusting the price cap on their loans, from 3% above the Bank base rate to 3.75%. It is not increasing the SVR by that much, but retains the right to do so.
Halifax said the increase was a result of market conditions, which had pushed up the cost of raising funds through retail savings and the wholesale markets. It said that while the average savings rate was 1.18% below the base rate in 2007, it had increased to 1.27% higher than the base rate, making it expensive to fund mortgages through savers’ deposits.
Stephen Noakes, mortgage director at Halifax, said the new rate “more accurately reflects the cost of funding a mortgage”.
David Hollingworth of mortgage broker London & Country said he couldn’t rule out other lenders increasing their SVRs.
Ray Boulger of broker John Charcol, said Halifax customers should shop around for a cheaper rate, but acknowledged “a number of people will find it difficult to switch lenders – perhaps they don’t have enough equity, can no longer prove income or want to stay on an interest-only mortgage”.
For these, the best option could be Halifax’s offer to customers of a fee-free switch to a two-year fixed rate of 3.49% on borrowing up to 60%, or 3.74% on loans of up to 75%.
Despite the increase, of the major lenders only Lloyds TSB and Nationwide have lower SVRs than Halifax, at 2.5%.
Customers who have taken out a Halifax mortgage since January 2011 already revert to an SVR of 3.99%.
RBS, also largely owned by the taxpayer, has also raised the rates applied to its One Account and offset mortgage.