More mortgage woes ahead for millions

More lenders will now be tempted to increase profits by raising rates in the coming weeks, experts warn

Hundreds of thousands of Santander borrowers got a shock this week through the post. The Spanish-owned lender wrote to an estimated 300,000 mortgage customers on its standard variable rate to tell them their repayments would soar by 12 per cent from October – a rise four times the rate of inflation.

The bank's justification? "The cost of running a bank in the UK has increased dramatically," it claimed on Wednesday. Others had a different explanation for the bank's move. "It's profiteering, pure and simple," stated the mortgage broker Mark Harris of SPF Private Clients.

Behind the corporate excuses and accusations is the stark fact that many thousands of borrowers will have to find hundreds of extra pounds simply to keep up with their mortgage payments.

Santander simply told customers that the interest rate will climb from 4.24 per cent to 4.74 per cent from 15 October. That doesn't sound so much but actually means the bank will charge a borrower with a 25-year 150,000 repayment mortgage an extra £528 a year – or £44 a month.

That could be enough to push hard-pressed families over the financial edge, warned Moneysupermarket on Thursday.

It's Affordability Tipping Point report revealed that household finances in the UK are now so stretched that one in three adults believe a rise in monthly outgoings of £50 would push them to financial breaking point.

Of these, one in five say they are now sitting on the brink, finding it impossible to meet their monthly bills and costs. With energy bills set to soar this autumn too things look set to get much worse for struggling families.

Santander is far from being alone in raising its standard variable rate, despite the fact that the Bank of England base rate has remained unchanged since March 2009. In fact the mighty Halifax raised its SVR by a similar amount in May, along with the likes of the Co-operative Bank and Clydesdale and Yorkshire – moves which hit a million borrowers.

Experts predict there will be further bad news ahead for those on standard variable rates with rival lenders.

"The worry now for borrowers is which lender is next?" said the independent financial adviser Daniel Bailey of Middleton Finance. "I have been warning clients about reviewing their mortgage for the last year because their lender may arbitrarily increase their SVR, as has happened this week. Santander increasing its SVR should be a worry to all borrowers as other lenders will follow and look to increase their profit margins."

Adrian Anderson, director of the broker Anderson Harris, said: "As Santander has proven, lenders can raise their SVRs on a whim, so borrowers should not take for granted that rates won't rise, even if base rate doesn't."

Santander – along with other lenders that increase SVR – know that it can get away with it because many borrowers have effectively become mortgage prisoners. They are unable to switch to a better deal because they don't have enough equity in their home, or their circumstances have changed since they took out their loan so they no longer meet lenders' criteria.

'If you find yourself in this situation, seek advice," said Mr Anderson. "You can use savings earning next-to-nothing to reduce your outstanding loan which will improve your equity position, for instance."

PROMOTED VIDEO
Life and Style
techCould new invention save millions in healthcare bills?
Sport
David Moyes gets soaked
sport Moyes becomes latest manager to take part in the ALS challenge
Voices
A meteor streaks across the sky during the Perseid Meteor Shower at a wind farm near Bogdanci, south of Skopje, Macedonia, in the early hours of 13 August
voicesHagel and Dempsey were pure Hollywood. They only needed Tom Cruise, says Robert Fisk
News
peopleEnglishman managed quintessential Hollywood restaurant Chasen's
Life and Style
food + drinkHarrods launches gourmet food qualification for staff
Arts and Entertainment
Michael Flatley prepares to bid farewell to the West End stage
danceMichael Flatley hits West End for last time alongside Team GB World champion Alice Upcott
Life and Style
Horst P Horst mid-fashion shoot in New York, 1949
fashionFar-reaching retrospective to celebrate Horst P Horst's six decades of creativity
News
Members and supporters of the lesbian, gay, bisexual, transgender (LGBT) community walk with a rainbow flag during a rally in July
i100
Life and Style
Black Ivory Coffee is made using beans plucked from elephants' waste after ingested by the animals
food + drinkFirm says it has created the "rarest" coffee in the world
Arts and Entertainment
Jamie T plays live in 2007 before going on hiatus from 2010
arts + entsSinger-songwriter will perform on the Festival Republic Stage
Life and Style
food + drinkThese simple recipes will have you refreshed within minutes
Finacial products from our partners
Property search
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

ES Rentals

    iJobs Job Widget
    iJobs Money & Business

    Service Desk Analyst- Desktop Support, Helpdesk, ITIL

    £20000 - £27000 per annum: Harrington Starr: Service Desk Analyst- (Desktop Su...

    Service Desk Analyst - (Active Directory, Support, London)

    £25000 - £35000 per annum: Harrington Starr: Service Desk Analyst - (Active Di...

    Junior Quant Analyst - C++, Boost, Data Mining

    £30000 - £50000 per annum: Harrington Starr: Junior Quant Analyst - C++, Boost...

    Junior Quant Analyst (Machine Learning, SQL, VBA)

    £30000 - £50000 per annum: Harrington Starr: Junior Quant Analyst (Machine Lea...

    Day In a Page

    All this talk of an ‘apocalyptic’ threat is simply childish

    Robert Fisk: All this talk of an ‘apocalyptic’ threat is simply childish

    Chuck Hagel and Martin Dempsey were pure Hollywood. They only needed Tom Cruise
    Mafia Dons: is the Camorra in control of the Granite City?

    Mafia Dons: is the Camorra in control of the Granite City?

    So claims an EU report which points to the Italian Mob’s alleged grip on everything from public works to property
    Emmys look set to overhaul the Oscars as Hollywood’s prize draw

    Emmys look set to overhaul the Oscars as Hollywood’s prize draw

    Once the poor relation, the awards show now has the top stars and boasts the best drama
    What happens to African migrants once they land in Italy during the summer?

    What happens to migrants once they land in Italy?

    Memphis Barker follows their trail through southern Europe
    French connection: After 1,300 years, there’s a bridge to Mont Saint-Michel

    French connection: After 1,300 years, there’s a bridge to Mont Saint-Michel

    The ugly causeway is being dismantled, an elegant connection erected in its place. So everyone’s happy, right?
    Frank Mugisha: Uganda's most outspoken gay rights activist on changing people's attitudes, coming out, and the threat of being attacked

    Frank Mugisha: 'Coming out was a gradual process '

    Uganda's most outspoken gay rights activist on changing people's attitudes, coming out, and the threat of being attacked
    Radio 1 to hire 'YouTube-famous' vloggers to broadcast online

    Radio 1’s new top ten

    The ‘vloggers’ signed up to find twentysomething audience
    David Abraham: Big ideas for the small screen

    David Abraham: Big ideas for the small screen

    A blistering attack on US influence on British television has lifted the savvy head of Channel 4 out of the shadows
    Florence Knight's perfect picnic: Make the most of summer's last Bank Holiday weekend

    Florence Knight's perfect picnic

    Polpetto's head chef shares her favourite recipes from Iced Earl Grey tea to baked peaches, mascarpone & brown sugar meringues...
    Horst P Horst: The fashion photography genius who inspired Madonna comes to the V&A

    Horst P Horst comes to the V&A

    The London's museum has delved into its archives to stage a far-reaching retrospective celebrating the photographer's six decades of creativity
    Mark Hix recipes: Try our chef's summery soups for a real seasonal refresher

    Mark Hix's summery soups

    Soup isn’t just about comforting broths and steaming hot bowls...
    Tim Sherwood column: 'It started as a three-horse race but turned into the Grand National'

    Tim Sherwood column

    I would have taken the Crystal Palace job if I’d been offered it soon after my interview... but the whole process dragged on so I had to pull out
    Eden Hazard: Young, gifted... not yet perfect

    Eden Hazard: Young, gifted... not yet perfect

    Eden Hazard admits he is still below the level of Ronaldo and Messi but, after a breakthrough season, is ready to thrill Chelsea’s fans
    Tim Howard: I’m an old dog. I don’t get too excited

    Tim Howard: I’m an old dog. I don’t get too excited

    The Everton and US goalkeeper was such a star at the World Cup that the President phoned to congratulate him... not that he knows what the fuss is all about
    Match of the Day at 50: Show reminds us that even the most revered BBC institution may have a finite lifespan – thanks to the opposition

    Tom Peck on Match of the Day at 50

    The show reminds us that even the most revered BBC institution may have a finite lifespan – thanks to the opposition