Brokers claim Lloyds is exploiting trapped borrowers with SVR hike
Lloyds Banking Group has been accused of taking advantage of self-cert borrowers’ inability to remortgage by raising the SVRs for customers of its Bank of Scotland and The Mortgage Business subsidiaries.
Bank of Scotland and TMB, both closed to new business, have told some 175,000 customers that their SVRs are increasing from 4.84% to 4.95% on November 1.
A spokesman for Lloyds group says: “The 0.11% increase in rate equates to an average change of around £10 a month for customers. This reflects an increased cost of funding and the higher capital costs of operating these mortgages.
“The majority of borrowers with these brands have non-mainstream mortgages and 4.95% remains a competitive rate for such products.”
Ray Boulger, senior technical manager at John Charcol, says most TMB and Bank of Scotland borrowers will be on self-cert or buy-to-let deals, and those on the former will find it difficult to remortgage to a different lender.
He says: “Arguably, what Lloyds group is doing is taking advantage of a situation where a lot of its customers are unable to remortgage.
“A cynic would say this is an easy way of raising cash, but it is also understandable because funding costs are increasing for lenders as a result of the eurozone crisis.
“This flags up the risk to borrowers of being with a closed lender which has little incentive to remain competitive.”
One broker commenting on Mortgage Strategy Online says: “Both these brands are aware that self-cert clients sitting on an SVR are unable to remortgage elsewhere, so they are simply bumping up profits.”
A Lloyds group spokesman says the bank understands why concerns have been raised about self-cert borrowers’ ability to remortgage, but stresses that the change has been made because costs have increased more for non-mainstream providers.