Will Halifax raise mortgage rates?

HalifaxSean Dempsey/PA Archive/Press Association Images

There's bad news for anyone on a standard variable rate mortgage, Halifax has raised the maximum level to which is is allowed to raise its SVR. It's an alarming sign that it could be about to raise rates, and there's every chance that it won't be the only one to do so.

So what does it mean for you?

SVR popular

Before the credit crunch no mortgage-holder would be seen dead on their lender's standard variable rate. Why would you when the world and his wife were falling over themselves to offer you a brilliant new deal?

Now, however, after five years of an arid mortgage market, it's a very different story. For years anyone who didn't own most of their home and anyone looking to borrow more than a fraction of their salary has found it nigh-on impossible to remortgage. Meanwhile, those who have lost their jobs and taken a lower-paying position found themselves unable to get a mortgage to cover their existing loan.

For five years people have been reaching the end of their fixed or discounted rates and found themselves with no alternative to the SVR.

The good news is that so far the low Bank of England interest rate has kept these SVRs nicely depressed, so we haven't had to pay over the odds.

Raising SVR?

However, Halifax raising the cap is a very worrying sign. It doesn't apply to all its customers, as only those with an early repayment charge actually have the SVR capped. It has told these customers that they will have the right to repay in the next three months without a charge before the cap gets changed.

After that, the SVR will be able to move to 3.75% above the bank base rate (which would be 4.25% at the moment). This constitutes a big change from the current cap of 3% above base rate.

Those without an early repayment charge will face any rise regardless. David Hollingworth, associate director of communication for London and Country brokers told AOL: "Halifax has been keen to point out that the cap only affects a certain number of borrowers, but there are many more on a straightforward SVR."

Halifax has said this is no indication that its SVR is going to rise. However, Hollingworth isn't convinced. He says: "We will have to see what its intention is, but given that it gives them the flexibility to increase the rate, we would assume there may be a rise in future." Halifax also said the move was in response to increases in the costs of funding - which would in itself indicate that the rate may rise.

First of many?

Hollingworth adds that the fact that Halifax is making this move underlines that the SVR is set at the lenders discretion and: "Where a company the size of Halifax looks at how it manages the SVR we wouldn't rule out others following suit. In a market which is increasingly uncertain, the costs of funding are going up, which means other lenders may have to look at the SVR for existing borrowers."
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