Brokers are waiting with baited breath, ready to pounce with criticism if the Co-Operative Bank hikes its rate yet again following the most recent Bank of England base rate rise.
After May's base rate rise of 0.25%, the Co-Op raised its SVR by 0.45% – the highest rise made by a lender that month.
Although its SVR currently stands at 5.79% compared with rates such as 6.50% from Abbey, 6.29% from Alliance & Leicester and 6.24% from GMAC-RFC, some brokers say the Co-Op's rate rise decisions are misleading clients.
Tom Bland, associate at Savills Private Finance, says: “Clients of the Co-Op are linked to its own variable rate as opposed to the Bank base rate. The Co-Op is aware of this and knows it can make much more money by raising its SVRs as high as it has. This is misleading and makes clients lose faith in the lender.”
He adds: “The Co-Op is making a name for itself as an untrustworthy organisation to deal with and is using underhand tactics. It is time lenders provided more transparency within their base rate decisions.”
Ray Boulger, senior technical manager at Charcol, says the Co-Op's 0.45% rise was not a clever move but adds: “The Co-Op had a similar problem to Nationwide – it found itself in a no-man's land where it could not get any extra margins on its low SVR and had to act upon this.
“But it might have been better off doing this gradually rather than in one huge jump.”
Paul Lawler, spokesman for the Co-Op, says: “We haven't made a decision yet on how we will react to the latest base rate rise.
“We found that lenders with higher SVRs could offer bigger discounts and we were losing customers to these lenders. We responded with our 0.45% rate rise.”
Boulger thinks that the Co-Op could raise its SVR by an extra quarter percentage point in response to this month's rate rise.