Last week’s announcement by Skipton Building Society of their intention to increase their Standard Variable Rate from 3.50% to 4.95% led unsurprisingly to widespread coverage in this weekend’s financial press. The Society had previously maintained a ‘mortgage promise’, guaranteeing that their variable rate would be no more than 3% above the Bank of England Base Rate, but has removed this ceiling in response to ‘exceptional market conditions’. Experts suggested in the Financial Times, Independent and Sunday Express that other lenders will soon follow suit, and urged borrowers to review their mortgage deals now. The Observer predicted however that the bigger lenders, such as Nationwide, who are currently offering competitive rates and writing a lot of business, are unlikely to make any major changes just yet.
Further predictions for the year ahead came with the news that analysts expect inflation to rise above 3% next month. The Sunday Times, Financial Times and Independent on Sunday all looked at the impact this could have on mortgage rates, with brokers divided over whether borrowers should be securing a fixed rate now or sticking with variable rates. ‘Switch to fix’ mortgages were discussed as a viable alternative, as they allow borrowers to take a tracker rate with an option to move to a fixed rate without any Early Repayment Charges. Nationwide and Royal Bank of Scotland are among the few lenders that offer this type of product at the moment.
Elsewhere, the FT revealed that strict criteria are still inhibiting mortgage approvals despite a recent increase in the number of products on the market, while the Times suggested that more than 80,000 customers of some Building Societies including Cheshire and Derbyshire could be due a refund after the FSA deemed charges levied on customers in arrears as unfair.