Halifax Introduces a “New” Variable Mortgage Rate

Last week Halifax announced that it will introduce a new variable mortgage rate from the 4th January.  The current standard variable rate is currently set at 3.50% but the new “Homeowner Variable Rate” will be set at a higher rate of 3.99%.  This will apply to all new mortgages from that date and borrowers will revert to the higher rate once their initial deal comes to an end. Halifax is emulating the moves already made by another Lloyds Banking Group lender, Lloyds/C&G and Nationwide Building Society before them.  These lenders had placed Base Rate tracking guarantees on their variable rate, a seemingly harmless commitment a few years ago but one that has hit lenders in the pocket as the market and funding costs have altered.  In fact Nationwide’s recent half year results pointed to their low 2.50% variable rate costing the Society around £300m over the first 6 months. Although the introduction of higher variable rates isn’t something to be welcomed, this approach does at least protect existing customers from a rate hike.  In most cases lenders are at liberty to manage their standard variable rates as they see fit and many lenders have increased their rates over the last 12-18 months despite Base rate remaining static.  Halifax has the ability to alter its tracking guarantee by giving notice and has used this to increase its rate before, so existing borrowers will be pleased to see it employ this new method. What these changes serve to highlight is that borrowers do need to keep an eye on the rate they are paying and whilst some of the low variable rates still look attractive, others are much higher.  That could spell potential savings especially as there has been a growing number of attractive remortgage deals on the market.

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