The press has been full of Standard Variable Rate changes – first RBS increased the standard rates for its One Account borrowers by 0.25%, followed almost immediately by Halifax increasing its rate from 3.50% to 3.99% for an estimated 850,000 customers. Now we have news that Bank of Ireland (aka Bristol & West) upping its SVR in two stages from the current 2.99% to 4.49% by September.
You don’t need to be a financial guru to know this is bad news for the borrowers concerned. But there are wider implications for the rest of us too.
First there’s the possible domino effect. Now that a few have gone, how likely is it that others will follow? All three of these lenders cited the increased cost of funding mortgages as the primary reason for their hikes. It’s not that there’s been a sudden savage increase – more that there’s been a cumulative effect over the last 3 years eroding funding margins that they’ve finally given into. Far be it from me to defend a lender’s SVR hike, but we might wish our energy companies had showed such restraint.
That being the case though, it’s a fair bet that other lenders are feeling the same pressure, and of course now that a few have chewed this particular lead projectile, it makes it easier for others to do likewise.
We wouldn’t really expect wholesale changes – generally speaking the lenders who’ve gone were in the lower range of SVRs so had some ground to make up – but there could well be a few more to come. Will your lender be one of them? This could be a white-knuckle period for a lot of people.
And then there’s the impact on mortgage availability. As we’ve already commented here, the last couple of months have seen many lenders forced to increase their rates because they’re taking more business than they can cope with. Now we have the biggest lender in the land + 2 friends pushing rates up. That is naturally going to lead to more remortgaging as people seek lower rates and/or the protection of a fix. That in turn will put yet more pressure on lenders’ capacity and likely prompt them to push rates up further. Who said “and make more money into the bargain”? You cynic, you.
So, three things to bear in mind:
1. If you see a good rate grab it because it might not be there for long
2. Plan ahead – the lenders with the best rates will be the busiest, so allow for some delays if you can
3. Keep a close eye on the press and the post, and be ready to act if your lender decides to be next
Finally, for those already staring a rate rise in the face, have a play with our 1-minute mortgage check for a quick idea of what might be available