Money Insider: SVR hike may mean time for a mortgage move

 

As expected, the decision by Santander to increase its standard variable mortgage rate (SVR) has received short shrift from the media, but claims and accusations aside, the move should act as a wake-up call for other borrowers currently sitting on SVR.

The 300,000 or so customers of the UK arm of the Spanish banking giant will be unhappy to learn that their monthly mortgage repayments will take a bigger slice of their disposable income from October, but for some at least there will be the option of moving to a cheaper fixed or tracker option elsewhere.

Santander is increasing its SVR from 4.24 per cent to 4.74 per cent, which is just shy of the market average of 4.77 per cent.

This isn't the first instance of SVR increases this year, with Halifax, Co-operative Bank and Clydesdale/Yorkshire Banks already increasing rates in May, and I fear that with increasing capital requirements, higher regulatory costs and pressure on profit margins, Santander won't be the last lender to hike costs before 2012 is out.

Standard variable rates vary widely between mortgage lenders, with ING coming in at just 3.5 per cent and First Direct 3.69 per cent while at the other end of the scale Kent Reliance and Nottingham Building Society charge a much steeper 6.08 per cent and 6.14 per cent respectively.

The recent spate of SVR increases is a stark reminder to consumers that unlike a tracker product, the interest rate can move up or down even if there is no change in base rate.

Many commentators suggest simply switching your mortgage to a more appropriate and cheaper product. However it's not as black and white as that.

There are a number of factors to bear in mind with SVRs and it's not a case that one solution fits all for borrowers who are affected by these rate hikes.

For example, customers with a small mortgage balance and/or just a few years remaining on the term of their home loan may be just as well staying put due to the cost of switching.

Product fees and in some cases valuation and legal charges associated with a new mortgage mean that it's not always financially viable to look elsewhere.

Another thing to take into account is that the SVR is the same whatever your loan-to-value may be.

If you only have a 10 per cent deposit or less then the SVR you are currently being charged is likely to be cheaper than the latest best-buy fixed or discounted deals, whereas if you have 40 per cent equity you should be able to remortgage to a better option.

The ability to take your mortgage custom elsewhere will also depend on the state of your credit status. If your credit rating has deteriorated during the time you've had your current mortgage you may find it difficult to transfer to a new home loan elsewhere due to the strict lending criteria enforced by lenders these days.

The cost impact for someone with £50,000 on a Santander SVR mortgage with 20 years to run will be an extra £13.50 per month, but by switching to a five-year, fixed rate of 3.59 per cent and no fee with Post Office (assuming a 25 per cent deposit) you could cut your existing monthly payment from £309.35 to £292.30, saving £17 per month, or over £30 per month when compared with the higher SVR payments which kick in from October.

As I mentioned earlier, the cost savings are more substantial for those with larger mortgages. If you're borrowing £150,000, Santander's 0.5 per cent SVR hike will cost you an extra £40.47 per month from October

However, assuming a 25 per cent deposit and 20 years still to run, transferring to a tracker mortgage at 3.69 per cent and no fee from First Direct could save you £43.39 per month on your existing payments and £83.86 per month when compared with the increased 4.74 per cent Santander SVR.

The financial benefit will depend on the size of your mortgage balance and the term remaining, but you'll also need to take into account the product fees on a new mortgage as in some cases these can be well into four figures and wipe out most of the potential savings.

If you're unsure of the best course of action for your own situation speak to an independent mortgage broker and let them do the number crunching and help you find the most cost-effective options for your circumstances.

Andrew Hagger is an independent personal finance analyst from Moneycomms.co.uk – moneycomms@gmail.com

Independent Partners; request a free guide on NISAs from Hargreaves Lansdown

Arts and Entertainment
Gregg Wallace in Summer's Supermarket Secrets
tv All of this year's 15 contestants have now been named
Arts and Entertainment
Inside the gallery at Frederick Bremer School in Walthamstow
tvSimon Usborne goes behind-the-scenes to watch the latest series
Life and Style
A picture taken on January 12, 2011 shows sex shops at the Paris district of Pigalle.
newsThe industry's trade body issued the moratorium on Friday
News
Winchester College Football (universally known as Winkies) is designed to make athletic skill all but irrelevant
Life...arcane public school games explained
PROMOTED VIDEO
Arts and Entertainment
Could we see Iain back in the Bake Off tent next week?
tv Contestant teased Newsnight viewers on potential reappearance
Life and Style
Silvia says of her famous creation: 'I never stopped wearing it. Because I like to wear things when they are off the radar'
fashionThe fashion house celebrated fifteen years of the punchy pouch with a weighty tome
News
i100(and it's got nothing to do with the Great British Bake Off)
News
Angelina Jolie with her father Jon Voight
peopleAsked whether he was upset not to be invited, he responded by saying he was busy with the Emmy Awards
News
Bill Kerr has died aged 92
peopleBill Kerr appeared in Hancock’s Half Hour and later worked alongside Spike Milligan and Peter Sellers
News
news It's not just the world that's a mess at the moment...
Sport
footballPremiership preview: All the talking points ahead of this weekend's matches
News
Keira Knightley poses topless for a special September The Photographer's issue of Interview Magazine, out now
people
Voices
The Ukip leader has consistently refused to be drawn on where he would mount an attempt to secure a parliamentary seat
voicesNigel Farage: Those who predicted we would lose momentum heading into the 2015 election are going to have to think again
Arts and Entertainment
Cara Delevingne made her acting debut in Anna Karenina in 2012
film Cara Delevingne 'in talks' to star in Zoolander sequel
News
i100
Sport
Mario Balotelli pictured in his Liverpool shirt for the first time
football
Life and Style
tech
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

    Data Scientist (SQL,Data mining, data modelling, PHD, AI)

    £50000 - £80000 per annum + benefits+bonus+package: Harrington Starr: Data Sci...

    SAS Business Analyst - Credit Risk - Retail Banking

    £450 - £500 per day: Orgtel: SAS Business Analyst, London, Banking, Credit Ris...

    Project Manager - Pensions

    £32000 - £38000 Per Annum Bonus, Life Insurance + Other Benefits: Clearwater P...

    KYC Analyst, Birmingham - £200-£250 p/d

    £200 - £250 per day + competitive: Orgtel: KYC Analyst, Key Banking Client, Bi...

    Day In a Page

    Ukraine crisis: The phoney war is over as Russian troops and armour pour across the border

    The phoney war is over

    Russian troops and armour pour into Ukraine
    Potatoes could be off the menu as crop pests threaten UK

    Potatoes could be off the menu as crop pests threaten UK

    The world’s entire food system is under attack - and Britain is most at risk, according to a new study
    Gangnam smile: why the Chinese are flocking to South Korea to buy a new face

    Gangnam smile: why the Chinese are flocking to South Korea to buy a new face

    Seoul's plastic surgery industry is booming thanks to the popularity of the K-Pop look
    From Mozart to Orson Welles: Creative geniuses who peaked too soon

    Creative geniuses who peaked too soon

    After the death of Sandy Wilson, 90, who wrote his only hit musical in his twenties, John Walsh wonders what it's like to peak too soon and go on to live a life more ordinary
    Caught in the crossfire of a cyber Cold War

    Caught in the crossfire of a cyber Cold War

    Fears are mounting that Vladimir Putin has instructed hackers to target banks like JP Morgan
    Salomé's feminine wiles have inspired writers, painters and musicians for 2,000 years

    Salomé: A head for seduction

    Salomé's feminine wiles have inspired writers, painters and musicians for 2,000 years. Now audiences can meet the Biblical femme fatale in two new stage and screen projects
    From Bram Stoker to Stanley Kubrick, the British Library's latest exhibition celebrates all things Gothic

    British Library celebrates all things Gothic

    Forthcoming exhibition Terror and Wonder: The Gothic Imagination will be the UK's largest ever celebration of Gothic literature
    The Hard Rock Café's owners are embroiled in a bitter legal dispute - but is the restaurant chain worth fighting for?

    Is the Hard Rock Café worth fighting for?

    The restaurant chain's owners are currently embroiled in a bitter legal dispute
    Caribbean cuisine is becoming increasingly popular in the UK ... and there's more to it than jerk chicken at carnival

    In search of Caribbean soul food

    Caribbean cuisine is becoming increasingly popular in the UK ... and there's more to it than jerk chicken at carnival
    11 best face powders

    11 best face powders

    Sweep away shiny skin with our pick of the best pressed and loose powder bases
    England vs Norway: Roy Hodgson's hands tied by exploding top flight

    Roy Hodgson's hands tied by exploding top flight

    Lack of Englishmen at leading Premier League clubs leaves manager hamstrung
    Angel Di Maria and Cristiano Ronaldo: A tale of two Manchester United No 7s

    Di Maria and Ronaldo: A tale of two Manchester United No 7s

    They both inherited the iconic shirt at Old Trafford, but the £59.7m new boy is joining a club in a very different state
    Israel-Gaza conflict: No victory for Israel despite weeks of death and devastation

    Robert Fisk: No victory for Israel despite weeks of devastation

    Palestinians have won: they are still in Gaza, and Hamas is still there
    Mary Beard writes character reference for Twitter troll who called her a 'slut'

    Unlikely friends: Mary Beard and the troll who called her a ‘filthy old slut’

    The Cambridge University classicist even wrote the student a character reference
    America’s new apartheid: Prosperous white districts are choosing to break away from black cities and go it alone

    America’s new apartheid

    Prosperous white districts are choosing to break away from black cities and go it alone