Money Insider: SVR hike may mean time for a mortgage move
Saturday 01 September 2012
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 – email@example.com
Independent Partners; request a free guide on NISAs from Hargreaves Lansdown
- 1 Notting Hill Carnival: Woman shares selfie after being ‘punched in face for telling man to stop groping her’
- 2 Keira Knightley topless: Usually conservative actress does own take on #Freethenipple campaign for Interview Magazine
- 3 Daily Show's Jon Stewart destroys Fox News for its Ferguson coverage
- 4 When elitism grips the top of British society to this extent, there is only one answer: abolish private schools
- 5 Terror threat level raised to severe as PM warns Isis risk could last for decades
Robin Williams Emmys tribute led by Billy Crystal criticised for including 'racist' joke about Muslim woman
The Rotherham child abuse scandal is a tale of apologists, misogyny and double standards
Scottish independence TV debate: Pumped-up Alex Salmond bounces back in bruising second round against Alistair Darling
Do you realise just how foolish the UK looks?
Ukip Douglas Carswell defection: Tory MP jumps ship to join Nigel Farage
When elitism grips the top of British society to this extent, there is only one answer: abolish private schools
- < Previous
- Next >
iJobs Money & Business
£50000 - £80000 per annum + benefits+bonus+package: Harrington Starr: Data Sci...
£450 - £500 per day: Orgtel: SAS Business Analyst, London, Banking, Credit Ris...
£32000 - £38000 Per Annum Bonus, Life Insurance + Other Benefits: Clearwater P...
£200 - £250 per day + competitive: Orgtel: KYC Analyst, Key Banking Client, Bi...
Day In a Page
A first-floor flat with two bedrooms, a spacious reception room and communal grounds in a leafy part of London
A three-bedroom flat with a spacious rootop terrace and balcony, accessed from a private gated courtyard
A Grade II-listed pile with six bedrooms, stables and 39 acres of grounds in Standlake
A two-bedroom flat with boutique hotel-style interiors, close to the foodie haunt of West End Lane
A two-bedroom flat in a beautiful old vicarage, with many original features, close to the city centre
A three-bedroom 16th-century home with an aga kitchen, private gardens and heated outdoor pool, in Hadleigh
A three-bedrom home in sought-after Queen's Gate Mews, with Italian marble-finished bathrooms
Surrounded by glorious countryside in the village of Udimore, sits this impressive four-kiln oast and barn conversion
A five-bedroom house in the picturesque village of Kettlewell, north Yorkshire
An 18th-century former coaching inn with original staircase, open fireplaces and beams throughout
A Grade II-listed Georgian town house with three bedrooms and a south-facing courtyard, near Arundel Castle
Feel on top of the world at this über chic penthouse on the 37th floor of one of Europe’s tallest blocks.
A Grade II-listed Victorian villa with six bedrooms and two further cottages, all with spectacular sea views
A grade II-listed, Georgian cottage with mature 50ft garden, perfect for summer entertaining
A magnificent Georgian pile with turrets, seven bedrooms, a heated pool and four acres of gardens
Fairoak Farm has five bedroom suites, gym, outdoor swimming pool and golf course
Chic two-bedroom river-fronted flat with a private lift that delivers you directly to your home
A spectacular seven-bedroom Tudor pile, once owned by Henry VIII, with 18 acres of land
A seven-bedroom Georgian property previously used as a picturesque wedding venue
A split-level flat in a church conversion with two en suite bedrooms and 1,200sq ft of living space
A three-bedroom bungalow situated behind an impressive stone wall, £645,000
Windsor Castle overlooks this three-bedroom Victorian cottage located on one of Windsor's smartest roads
Chapel House is a former vicarage with nine bedrooms in the beautiful Upper Wye Valley
A five-bedroom B&B and separate owner's accomodation with potential for conversion
Enjoy summer by the Thames in this two double-bedroom converted warehouse in Rotherhithe village
A one-bedroom, luxury apartment with private gym and concierge service in Moorgate
A four-bedroom house in Hermitage Gardens with three reception rooms and landscaped gardens
A seven-bedroom Grade II-listed property with a separate self-contained apartment
A five-bedroom Victorian house with three reception rooms and galleried landing, £695,000
A six-bedroom farmhouse with five acres of land in a former cloth-making village
A secluded seven-bedroom detached house with large private garden, £490,000
A three-bedroom cottage overlooking Sarratt village green with open fires and solid oak floors
A three-bedroom maisonette flat in a Grade I-listed, Georgian townhouse in a sought-after location
A one-bedroom apartment located within a private gated development, north of Turnham Green
Look forward to a brighter future at two-bedroom Sunny Cottages, ideal for Londoners looking to downsize
A three-bedroom red-brick cottage with outbuildings and pretty gardens, £200,000
This three-bedroom flat within a former textile factory spans the corner of the fourth floor and has a balcony