Brokers must make most of SVR hikes

According to recent research from Which?, lenders’ SVR rises will leave consumers facing an additional £300m in mortgage payments over the next year.

What began as a trickle of lenders increasing their SVRs has now turned into a full-scale and predictable flood. The talk from lenders about why SVRs are on the rise is about their cost of funding.

But the truth lies in the fact that they have no other way of eking out greater margins from their existing SVR customers than via a hike.

The foundations for such action have been set in recent years with attempts to change existing terms or, more commonly, ensuring new customers did not benefit from SVR caps that luckier borrowers had.

Few lenders would have expected the base rate to stay so low for so long and this has been a game changer. Some borrowers are on SVRs which can only ever be, for example, 2% over base.

It is not surprising that lenders are trying to do all they can to ensure new customers pay far more for their SVRs than this.

Some lenders raise SVRs because they want borrowers off this rate. They want them to remortgage either to their own special deals where they can earn substantial fees, or if they do not want to keep the borrower they want them remortgaged off to other lenders.

Payment shock brought on by SVR rises means many borrowers will look for alternatives and this should be just the news that advisers have been waiting for.