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Why all lenders will not rush to raise SVR

As was widely predicted, the Bank of England left the base rate unchanged this month with the expectation that major banks will do the same for home owners.

But banks in Ireland, and Yorkshire and Clydesdale banks broke with conventional policy and raised their SVRs – in one instance by as much as 50%.

Those who make the first move always attract a disproportionate share of opprobrium and in some banking circles I suspect envy. But before we get excited at the prospect of a remortgage boom, there are good reasons to think others will not follow too quickly.

If we ignore the political consequences of another bout of bank bashing and upsetting policy makers by unilaterally upping rates, other economic factors mean banks may not rush to follow suit.

A rate rise could trigger arrears or repossessions,an expensive and unwanted outcome for banks and the government. And while funding costs have been high relative to most SVRs, they have now fallen.

Much time and effort has been spent finessing deposit and business loan rates to help increase profitability. While back book home loans remain marginal business for many, demand for lucrative business loans remains weak and higher rates will not help this.

The obvious area that may be affected by unilateral rate rises are back books that have been sold on, but on balance the economic landscape means the actions of these banks are probably the exception rather than the rule.

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