Halifax, Britain's biggest mortgage lender, is to dramtically increase the cost of its standard variable rate (SVR) mortgages from 1 May.
From this date, the rate will rise from 3.50 to 3.99 per cent. This could add almost £30 a month to repayments on a £100,000 home loan. The bank says it is taking the step as it is more expensive to fund mortgages on the money markets.
"In light of market conditions, particularly ongoing higher funding costs, it has been necessary for us to review the Halifax SVR. At 3.99 per cent, the rate more accurately reflects the cost of funding a mortgage, but it remains competitive for borrowers," Stephen Noakes, the mortgage director at Halifax, said.
But, as experts point out, 3.99 per cent makes Halifax's SVR more expensive than even long-term fixed rate deals.
"Once people see their rates are going up they may decide to move elsewhere. On average, the loan to value on a Halifax SVR is just 49 per cent, so most customers should find it easy to mortgage away. At 3.99 per cent as well it should be easy and cheaper to move to a tracker or five-year fixed rate deal," saud Ray Boulger, technical director at mortgage broker Charcol.