Lenders increase SVRs despite rate freeze

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by Kay Murchie

Research from price comparison website Moneyfacts.co.uk has found that several mortgage lenders have increased their standard variable rate (SVR) despite the Bank of England’s base rate freeze.

Since March 2009, the Bank of England has held interest rates at the historically low level of 0.5% but eight mortgage lenders have raised their SVRs by as much as 1.49% since April 2009.

At the end of April last year, Nationwide introduced a new SVR of 3.99% on new mortgage deals, while all deals taken out on or before April 29 remained at the previous rate of 2.5%.

Skipton Building Society and Cheltenham & Gloucester carried out similar measures and from Monday 11 January, Mansfield Building Society will become the latest lender to up its SVR for existing customers - up 0.35 percentage points to 5.59%.

As a result of the hikes, around 5.5 million homeowners are paying more on their monthly mortgage repayments and Moneyfacts warns that more lenders could follow suit in the next few months.

Darren Cook of Moneyfacts highlighted that in the low interest rate environment, remaining on a SVR rather than switching to a fixed-rate is an “attractive option for many”.

For some months now, remortgaging activity has hovered at low levels as a result of record low interest rates as borrowers opt to stay on their SVR rather than transfer to a new deal, he adds.

Mr Cook concludes: “There is little or no incentive for borrowers, particularly those with little or no equity, to find a new deal when in all likelihood they will have to pay a higher rate.”