Standard Variable Rates are just that...variable!

Two lenders in the Lloyds Banking Group stable are increasing the standard variable rate (SVR) charged to its mortgage borrowers.  From tomorrow the Bank of Scotland and The Mortgage Business will increase the SVR charged to existing mortgage borrowers from 4.84% to 4.95%.

Bank of Scotland and TMB no longer lend so it is those existing borrowers that are unable to switch to a new lender that will feel most vulnerable and aggrieved at the hike in rate.  That increase of 0.11% would see the monthly payment on a £150,000 repayment mortgage over 25 years increase by about £10 per month despite no change in Bank of England Base Rate.

Although the increase is not as large as some lenders have dished out in the last couple of years, it does once again highlight the fact that any mortgage linked to SVR is subject to changes at the lender’s discretion.

Base Rate tracker rates do not suffer the same problem as something like a discounted deal in that it is directly pegged to the Bank of England Base Rate and so will always move in line with any rate changes.

Even then there can be lower limits placed on a tracker deal, often referred to as a collar or floor that the rate cannot fall beneath.  However, in today’s market where the Base rate is at an all time low this is likely to be of less significance.

Of course some lenders’ SVRs have remained low and served borrowers well but others are much higher often in excess of 5% and even 6%.  It still makes sense to review whether an SVR is the right option and as mortgage rates have improved there is more opportunity to save money.


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