One million face mortgage rate rise

Updated: 
Housing estateMore than a million home owners will see the cost of their mortgage payments increase from Tuesday.

The majority of those affected are Halifax customers, who could typically find themselves paying nearly £200 extra a year, following a series of recent rate rise announcements from lenders.

The Co-operative Bank, Clydesdale Bank and Yorkshire Bank are also among those raising rates, blaming the weak economy and the increased cost of funding a mortgage.

Fears have been raised that people could struggle to switch to a better deal as lenders have already started tightening their borrowing criteria, triggering a fall in the proportion of mortgages being approved.

Halifax is raising its standard variable rate (SVR) from 3.5% to 3.99%, affecting 850,000 home owners. Borrowers revert to paying an SVR when their fixed rate deal ends.

The average balance of those affected is £67,500, meaning payments would increase by nearly £16.40 a month to £498.95 on a capital repayment mortgage with 15 years remaining. This equates to nearly £200 extra a year. Someone with a higher balance of £100,000 would pay £24.30 extra a month, with monthly repayments going up to £739.19, the equivalent of nearly £300 more annually.

Around 54,000 Co-operative Bank customers will see SVR rates go up by 0.5% to 4.74%, meaning payments will typically increase by £15 a month, or £180 a year.

Clydesdale and Yorkshire Banks' SVR rate will rise from 4.59% to 4.95%, affecting 30,000 customers, whose payments will typically go up by less than £30 a month.

RBS-Natwest is also pushing up the rate on its One Account, a non-SVR product, by 0.25%, affecting around 100,000 customers. For the majority of these customers, the new rate will be 4%.

Borrowers who have not managed to pay off much of their loan or are in negative equity could find themselves stuck with their existing lender and unable to switch to another provider. They will face more probing questions to prove they can pay back loans when stricter mortgage rules are introduced from next year.

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