Lenders hike mortgage rates for 1.2 million borrowers

This month, and within days of the three-year anniversary of the Bank of England's last change in interest rates (when they were cut to their current level of 0.5%), we've seen four mortgage lenders announce hikes in their Standard Variable Rate (SVR).  The upshot of these changes will be a rise in monthly mortgage payments for around 1.2 million homeowners.

The mortgage lenders that have  announced changes in their Standard Variable Rates are Halifax, Bank of Ireland, Clydesdale Bank, Yorkshire Bank, and Royal Bank of Scotland (on their offset and One Account mortgages). The following table shows what the rate increase will be for each bank, when it will be implemented, how many borrowers will be affected and the monthly increase in repayments for a typical £150,000 mortgage over 25 years.


Rate increase %New SVR %Date of changeNo. borrowers affected (approx)

Increase in monthly repayments*

Halifax0.493.99May 2012850,000£40
Bank of Ireland1.54.49June/September 2012100,000£122
Clydesdale & Yorkshire Bank0.364.95March/May 201230,000£32
RBS – offset and One Account0.254.0%**May 2012200,000£21
*for a £150k repayment mortgage over 25 years

**This is a typical variable rate (not Royal Bank of Scotland's SVR) for a One Account or offset customer, although rates may vary according to mortgage scheme. All variable rates for One Account and offset customers will increase by 0.25%.

Over the last three years, with the Bank of England Rate stuck at an all-time low, borrowers were feeling comfortable in the knowledge they were paying a low mortgage rate and so stayed on their lender’s SVR. However the cost of funding mortgages for lenders has been rising recently, making it difficult for them to raise money affordably. The solution for some has been to increase interest rates for existing borrowers to help balance the books.

Now these lenders have taken the plunge, it is widely expected others will follow. The message is very clear – if you’re on your lender's SVR you should be reviewing your current position.  If you’re on any sort of variable rate mortgage then you should find out how an interest rate rise would affect your own payments and your finances. And if you’re with one of the lenders who has already announced an increase, you can also use our handy 1 minute mortgage check to see if you could switch your current mortgage and save money – remember to use the new Standard Variable Rate that you will move onto in the calculator.

As demand from customers to switch away from Standard Variable Rates grows it is likely we’ll see an increase in the best mortgage rates available. Everything points to taking action sooner rather than later so you don’t miss the boat.

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