Lenders defy rate freeze to up mortgage costs

Millions of UK borrowers will be hit by rising mortgage rates costing up to £1,400 extra a year despite the Bank of England's (BoE) base rate freeze.

Increases in standard variable rate have been common since the base rate was set at 0.5% last March.

On Thursday the BoE maintained this level, but Moneyfacts research suggests eight building societies have upped their standard variable rate (SVR) despite the Bank's strategy to keep the base rate depressed, the Daily Mail reports.

Around 5.5 million people have a mortgage on or linked to a lender's SVR, a popular option as they are often the cheapest available deals.

But Moneyfacts warns more lenders may decide to increase their SVR in the coming months.

‘The momentum to increase SVRs appears to be gathering pace,' says Darren Cook, of Moneyfacts. ‘Now that a few have taken the step, it is highly possible others will follow.'
On Monday, Mansfield Building Society will become the latest lender to raise its SVR for existing customers, up 0.35% to 5.59%."

Chief executive Nigel Quinton cites the difficulty of competing for mortgage and savings customers with taxpayer-supported banks as part of the reason.

In one of the most controversial examples, Nationwide, which offers the best SVR at 2.5%, changed the rules for customers who took a mortgage with it since April 30 last year.

When their deal ends they cannot move to the 2.5% rate but are forced on to one at 3.99%, adding an average of £118 a month to repayments on a £150,000 mortgage.

Ipswich Building Society, Skipton, Accord Mortgages, Scottish Building Society, Cambridge Building Society and Marsden Building Society have all also changed their SVR.