As the recession took hold, the Bank of England gradually reduced interest rates to the lowest point in its 300 year history.
As bank rate fell, mortgage lenders reduced their standard variable rates (SVR), sometimes reluctantly and not always passing on the full reduction, so that for the first time in many years they became an attractive choice for some borrowers.
Lenders such as C&G and Nationwide have rules in place which guarantee that their SVRs can be no more than 2% above the Bank’s base rate. While their borrowers have benefited hugely, others have not been so fortunate, as some lenders dragged their heels over reducing their SVR, with many remaining at more than twice the level of C&G and Nationwide.
Those lenders who have not pegged their SVR to Bank base rate are able to increase it whenever they like, and this is something we have started to see.
Marsden Building Society recently announced an increase in SVR from 5.49% to 5.95% effective in the New Year and Kent Reliance increased theirs by 0.3% to a huge 6.08% from 1st December.
Others have increased by even bigger margins. Last month Accord (part of Yorkshire Building Society), raised their SVR by 0.65% and Cambridge Building Society went up by 0.59%.
More lenders increased earlier in the year, and we have heard rumours that another major lender is planning to ditch their tie to base rate. This is yet to be confirmed, but we will let you know when it is.
Right now not one lender has an SVR which cannot be beaten by rates on offer from other lenders, and in many cases the rate could be halved.
While this is true, it doesn’t mean that everybody should change lenders. What it does mean is that borrowers who opted for an SVR should have a close look at the rate, and decide whether it is still the best home for their mortgage. If you’re on your lenders SVR,( or any other deal for that matter), take the 1 min mortgage challenge, as it may be time to switch.