Mortgage rates on the rise

The Momentum UK Team 05 March 2012

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Halifax yesterday became the second large bank in a week to announce that it would raise its standard variable mortgage rates for existing customers, in a move that could damage the recent upturn in the housing market.

On Sunday Halifax, part of the tax-payer backed Lloyds Banking Group, said that it would raise the standard variable mortgage interest rate from 3.5% to 3.99%.

The standard variable rate (SVR) is the interest rate charged on a mortgage after the initial deal period is over.

The announcement has provoked fears that the unexpected upturn in mortgage lending seen so far in 2012 will be damaged by the increased interest rates.

Last week the Royal Bank of Scotland (RBS) announced that they too would be raising their SVR for some existing customers, blaming the rising cost of borrowing for the increased rate. An RBS spokesman said:

"Over the last year the cost of funds at which we need to borrow at to fund our mortgage commitments has risen considerably.

"We have absorbed the cost during this period but have now decided to pass on some of this increase, 0.25% to our Offset and The One Account customers. For the majority of our Offset and One Account customers their new rate will be 4%, the same as our standard variable rate."

The RBS rate increase is likely to affect around 200,000 customers.

Marc Gander, of the Consumer Action Group, said:

"It's shocking, it's coming at a time when people need this thing least of all. This is a nice thank you gesture to all the lovely people who bailed them out."

"They are doing fabulously well and it amazes me that they can't decide to share some of the burden that the rest of us are sharing. If they are saying they have to pass on rising costs, why can't they pass some of the good times on as well as the bad times?"

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