SVRs have become disjointed from base rate, says Moneyfacts
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Base rate has been at an all time low of 0.50% for the last ten months and with no incentive to move on to a new deal, increasing numbers of borrowers have moved onto their lenders’standard variable rate.
While some borrowers benefit from the cut in base rate being passed on in full, others have not been so fortunate, with a difference of £5,670 between the cheapest and the most expensive lenders.
Michelle Slade, spokesperson for Moneyfacts.co.uk, says many lenders’ SVRs have become disjointed from base rate, with only a fraction of the cuts having been passed on.
She says: “Many smaller building societies have passed on a fraction of the base rate cuts in a bid to deter borrowers from languishing on the SVR.
“Some borrowers on SVR may have paid more than double for the same mortgage than if they had been with a different lender.
“Those that have remained on the highest SVRs are likely to be those with little equity, which diminishes their options.”
She says lenders such as Skipton have been left with no option but to increase their SVR.
She adds: “SVR has become a real product option for many borrowers. Many see little incentive to move on to a new deal where, in many instances, the rate is much higher than the SVR.
“Many borrowers are just looking at the here and now, and are not considering the future impact of base rate rises.
“When a base rate increase becomes more probable, we may see fixed rates start to rise.
“Borrowers who delay the decision to find a new deal may find they experience a more significant rise in their repayments when they do move.”
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Readers' comments (3)
Anonymous | 25 Jan 2010 10:30 am
Further evidence of SVR hikes. A client has informed me that her UCB Homeloans (now Nationwide specialist) SVR has been increased by 0.3 % this month.
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Anonymous | 25 Jan 2010 11:57 am
SVR has always been a real product for a lot of borrowers, and with increasingly high up front fees and low rates generally will appeal to more and more borrowers. The potential problems are with those who cannot afford high mortgage payments delaying when they lock into a fixed rate.
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Anonymous | 25 Jan 2010 10:25 pm
With unemployment expected to rise further and affordability declining, repossessions will inevitably rise.Fist we had greedy banks, now we have greedy banks and building societies and it seems that nothing can be done about it.
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