Increasing numbers of homeowners are moving onto their lender’s standard variable rate (SVR), reflecting a market that currently offers little incentive to opt for a new deal.
The cut in the Bank of England’s base rate of interest has proved to be a lottery for those with a mortgage, as borrowers on tracker deals that reflect the measure have effectively been served a payment holiday.
Others have not been as fortunate: figures from Moneyfacts.co.uk show that the margin between the cheapest and most expensive lenders for a homeowner with a mortgage worth £150,000 is £5,670. “Many lenders’ SVRs have become disjointed from base rate, with only a fraction of the cuts having been passed on,” commented Michelle Slade, spokesperson for Moneyfacts.co.uk.
The decision by Skipton BS to increase its SVR from 3.50% to 4.95% (effective from 01.03.10) split opinion last week, a move that vindicates the decision by other lenders not to introduce rate cuts, according to Ms Slade. “The absence of rate cuts has been criticised in the past, but it appears to be a prudent step as other lenders such as Skipton BS have been left with no option but to increase their SVR.”
This inertia has led many borrowers to shun a new deal, instead biding their time on an SVR rate. However, those choosing to revert to SVRs could see payments rise sharply when the base rate rises, warned Ms. Slade.
source – eMoneyfacts
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Justin Moy