Homeowners suffer as mortgage rates rise
If you were already a homeowner when the recession first hit, you may well have enjoyed just a little financial respite thanks to the drop in mortgage rates. But the lenders have clearly tired of low rates and millions of homeowners are set to suffer as mortgage rates are hiked.
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The fact that the Bank of England base has been held at 0.5 per cent (the lowest since it was founded in 1694), apparently makes no difference to lenders who are pushing up their rates. For some, that could mean as much as £1,400 a year on top of their current charges.
Research from financial information firm Moneyfacts has revealed that eight building societies have raised their standard variable rate (SVR) despite the base rate freeze. Millions of homeowners, tempted originally by fixed rate or tracker mortgages will be moved to their lender's variable rate once their deal ends. And if rates continue to rise that could leave many struggling to pay their mortgage, particularly where salaries have been frozen and household bills continue to hit us hard.
Most controversial of the SVR rises came from Nationwide. If you took out a mortgage with the company since April 30 last year, when your deal ends you will not be switched to their currently attractive SVR of 2.5 per cent but will be forced on to one at 3.99 per cent – and that means, for the average repayment mortgage of £150,000, you will pay a whopping £118 extra each month.
A leading economist told the Daily Mail that he believes the Bank of England should "go the whole hog" and cut the base rate to zero, but this seems unlikely to happen. And since the mortgage lenders have already ignored the base rate freeze, even that would seem unlikely to help struggling homeowners.
With even the Bank of England admitting that we are still well and truly mired in the recession, how is it that mortgage lenders can justify hiking up rates?
