SVR hikes have been back in the news again this month. Lloyds TSB (including Cheltenham & Gloucester), whose Standard Variable Rate is currently 2.5%, has, from the 1st June, introduced a new, more expensive variable rate for new borrowers. The new “homeowner variable rate” is now 3.99% and will be paid by all new mortgage customers once their fixed or tracker deal ends.
The reason that Lloyds has created a new rate is that it has in place a guarantee that its SVR will not rise more than 2% above the Bank of England Bank Rate. Between October 2008 and March 2009, Bank Rate was slashed from 5% to a record low of 0.5% and it has remained at this level ever since. So for over a year now, Lloyds will have been receiving a low interest payment of 2.5% from a large proportion of its borrowers and this is bound to have hit them financially.
Nationwide, which has the same 2% guarantee on its SVR, made a similar move last year by introducing its Standard Mortgage Rate (also at 3.99%). Last month it admitted that its low SVR guarantee was a major factor in a 46% drop in underlying annual profits before tax to £212million.
If you’ve already got a Lloyds TSB or C&G mortgage and are either currently paying their SVR or due to when you’re deal ends, then you won’t be affected by this change.
The same can’t be said for customers of either Leeds or Buckinghamshire Building Societies, both of whom have hiked their SVRs in the last few weeks. Leeds announced an increase of 0.20% to 5.69% and Buckinghamshire raised its rate by 0.49% to 5.24%.
After a raft of SVRs changes a few months ago, these latest moves highlight once again the perils of having your mortgage deal linked to a rate that your lender can change at its own discretion.
Use our SVR watch to see if your lender has hiked its Standard Variable Rate recently. And don’t forget our 1 Minute Mortgage Check which will tell you if we think we can beat your current mortgage rate.