Halifax is introducing a new Homeowner Variable Rate for new customers from January 4 2011.
The 3.99% rate will only apply to new Halifax mortgages.
There is no change for existing Halifax mortgages which will remain on the existing Standard Variable Mortgage Rate, which is currently 3.50%.
The rate does not have a cap nor is it directly linked to Bank of England base rate.
Any customer taking a new product from January 4 2011 will not revert to the new Halifax Homeowner Variable Rate before 2013.
When new mortgages revert to the Halifax Homeowner Variable Rate at the end of the initial product period customers can switch to a new product without paying an early repayment charge and make unlimited overpayments, subject to eligibility.
Customers with existing mortgages will revert to the existing SVR when their deal expires. Any customer taking out a further advance or product transfer will do so under the new Halifax Homeowner Variable Rate. The new rate will then only apply to the amount being transferred or the additional amount being borrowed.
Halifax says the new policy is being implemented in the light of market conditions.
It says the cost of funding a mortgage deal in today’s market is substantially higher than the longer term average. The new rate reflects the ongoing higher cost of funding, in both the wholesale and the retail markets, and acknowledges that lenders must consider a number of factors when pricing a mortgage deal, including capital costs.
It says pricing deals to more appropriately reflect the cost of funding mortgages will enable Halifax to continue to offer a competitive and innovative range of products.
Stephen Noakes, commercial director of mortgages, Lloyds Banking Group, says: “In light of market conditions, particularly ongoing higher funding costs, we have introduced this new rate for new mortgages. This increased cost of funding is reflected in this new rate, whilst remaining competitive for borrowers.
“Customers will not revert to the new rate before January 2013, at the earliest. Introducing the Halifax Homeowner Variable Rate will enable us to continue to offer a wide range of competitive products.”