Borrowers lose through lost guarantee

At the end of an existing mortgage deal with LloydsTSB will revert from next Tuesday to a new "homeowner variable rate", rather than the lender’s existing standard variable rate (SVR), which is guaranteed to be 2 per cent above base rate.

This is bad news for homeowners because the new variable rate is much higher, at 3.99 per cent. But according to Michelle Slade, of the Moneyfactswebsite, the move was inevitable. "The move by Lloyds follows similar moves by Nationwide Building Society and other smaller societies," she said. "Now the UK’s biggest lender has moved to increase rates, other providers may follow."

The new deal also relates to mortgages with its Cheltenham & Gloucester subsidiary. "When LloydsTSB made the decision to guarantee its SVR, it never expected the Bankof England base rate to go so low," added Slade. "Lloyds will have found the current arrangement uneconomical going forward." The current average SVR is 4.73 per cent so Lloyds’s new 3.99 per cent rate is competitive – but the decision still leaves a nasty taste.