Millions of mortgage holders are set to see their monthly payments rise as three of the UK's biggest lenders all announce rate rises, despite the Bank of England base rate remaining at a record low. NatWest and Halifax will be increasing rates to both new and existing borrowers whilst Santander will only be increasing rates on new mortgages.
How much are rates going up by for existing borrowers?
The Halifax said it is increasing its Standard Variable Rate (also known as the SVR) by 0.45% to 3.99% with effect from 1 May. Natwest plan to increase its SVR from 3.75% to 4% from 1st May as well.
So how much will your monthly mortgage payments go up by in £s?
Halifax and Natwest customers can use this mortgage calculator to calculate how much their monthly payments will go up by in £s as a result of the hike in SVRs.
So why are they putting up their rates?
Basically, it is because the rate of interest at which banks borrow money (then lend this on to their customers) has risen over the past few months. This is in part due to the Euro crisis which has increased pressure within the banking community resulting in a rise in interbank rates.
Lenders stated that they have tried to avoid any increases but they are no longer able to absorb the rises internally and have no alternative but to raise their rates.
Will all lenders follow suit and increase their rates?
I think it's a case of let's wait and see. Lloyds Banking Group and Virgin Money have both said they have no plans to increase their rates with other lenders keeping quiet on the subject so far.
This move by the big lenders will have an impact on those families already financially stretched with many unable to access cheaper deals due their circumstances.