Consumers could be hit by rising mortgage rates from lenders
June 2, 2008
Since August 2006 the base interest rate has risen five times in the UK, taking it from 4.5% to 5.75% in just under one year. Since July of this year struggling homeowners have been relieved to find that the base rate has remained stable, although the Bank of England has failed to cave in to calls for interest rates cuts. However, although the base rate has remained stable at 5.75% since July 2007 recent reports suggest that a number of lenders are still raising their mortgage interest rates, which means that some homeowners may still feel the additional pinch.
A recent report showed how Standard Life has raised its standard variable mortgage rate by 0.15% taking it to 7.46%. Following the decision to raise rates by this mainstream lender it has been predicted that many other mainstream lenders will most likely follow suit, which means that millions of homeowners could face rising interest rates and repayments despite the Bank of England keeping the base rate on hold.
An industry official stated that this was a warning to consumers not to feel overconfident about the base interest rate being kept on hold. He said: “This is a stark warning for anyone on an SVR rate or, indeed anyone with a rate linked to the SVR, as with many discounted rates. SVR is a managed rate, controlled by the lender, and it can and does move when base rate is stable.”
It is thought that many of the lenders are raising their rates in response to the effects of the credit crunch, which has swept across the UK over the past few months, creating havoc in the financial markets. One Standard Life official said: “The change in SVR is a consequence of significant changes to the mortgage market in recent months.”
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