Santander hikes variable mortgage rate to 4.74%

 

Mortgage costs for thousands of borrowers will jump from tomorrow when one of the country's biggest lenders hikes its standard variable rate (SVR).

Santander's 0.5% rise to 4.74% will result in an average increase of £26 a month or £312 a year for a typical £100,000 mortgage.

The switch is expected to affect hundreds of thousands of customers, although Santander has not disclosed the figure.

Santander's SVR change, first announced in August, is one of a number by lenders in recent months, dashing hopes that households will see some benefit from the Bank of England's funding for lending scheme.

Santander blamed the increase on its own funding costs and pointed out that similar market dynamics drove its competitors to push up their SVR rates five months ago.

More than a million home owners saw their mortgage rates increase in May as lenders such as Halifax, the Co-operative Bank and Clydesdale and Yorkshire Banks raised their SVR rates, even though the Bank of England base rate remained at a historic 0.5% low.

At the end of August, Britain's biggest building society Nationwide announced it was pushing up some mortgage rates for new borrowers, adding 0.3% on some fixed-rate products and 0.2% on tracker deals.

While in its early stages, the funding for lending scheme has sparked some increased competition among mortgage lenders, although much of this has been concentrated around borrowers with larger deposits of around 40%.

Lenders have said mortgage availability has been boosted by the scheme, although they have tightened their borrowing criteria and do not expect this to loosen in the next few months.

Fears have been raised that many people hit by the SVR increases will struggle to switch to a cheaper deal and could find themselves trapped, with average SVR rates at their highest levels in three and a half years.

The typical SVR rate had climbed to 4.27% by the end of August, the highest since spring 2009, according to Bank of England figures.

Santander said its own SVR increase was prompted by a range of factors, including the increased cost of funding a mortgage.

A Santander spokesman said: "Additionally, the cost of running a bank in the UK has increased dramatically through a combination of increased liquidity, capital and funding requirements."

An SVR is the default rate that mortgages tend to switch to once an initial fixed or tracker deal period ends.

David Hollingworth, associate director of London and Country Mortgages, said: "If you're on an SVR, which is something that more borrowers are stuck with because of the way the market has moved, you can't just feel you are sitting pretty because nothing is happening with base rates.

"I would not be surprised to see other lenders following suit."

Speaking generally about the upward movement in SVR rates, a spokesman for the Council of Mortgage Lenders (CML) said that the funding for lending scheme has been launched at a time when lenders' rates are seen as facing an upward pressure amid the tough economy.

He said the scheme could result in rates being lower than they might have been had the initiative not been in place and each lender would be affected differently.

This means some rates might still go up, but to a lesser extent than they would have done without funding for lending.

"Rates may be lower than they would otherwise have been, but this does not necessarily mean lower in absolute terms," the spokesman said.

"The scheme has only just been introduced from the beginning of August, and it is scheduled to run for 18 months."

A Santander spokesman pointed out that the lender has a range of deals on offer for new customers as a direct result of the funding for lending scheme, which is what the initiative was designed for, as a stimulus for new lending.

PA

News
people
Sport
FootballGerman sparks three goals in four minutes at favourite No 10 role
News
Rumer was diagnosed with bipolarity, attention deficit hyperactivity disorder and post-traumatic stress disorder: 'I was convinced it was a misdiagnosis'
peopleHer debut album caused her post-traumatic stress - how will she cope as she releases her third record?
Sport
A long jumper competes in the 80-to-84-year-old age division at the 2007 World Masters Championships
athletics
PROMOTED VIDEO
Sport
Radamel Falcao was forced to withdraw from the World Cup after undergoing surgery
premier leagueExclusive: Reds have agreement with Monaco
Arts and Entertainment
'New Tricks' star Dennis Waterman is departing from the show after he completes filming on two more episodes
tvHe is only remaining member of original cast
Life and Style
Walking tall: unlike some, Donatella Versace showed a strong and vibrant collection
fashionAlexander Fury on the staid Italian clothing industry
Arts and Entertainment
Gregory Porter learnt about his father’s voice at his funeral
music
News
ebooksAn unforgettable anthology of contemporary reportage
Arts and Entertainment
tvHighs and lows of the cast's careers since 2004
Life and Style
Children at the Leytonstone branch of the Homeless Children's Aid and Adoption Society tuck into their harvest festival gifts, in October 1936
food + drinkThe harvest festival is back, but forget cans of tuna and packets of instant mash
Sport
Lewis Hamilton will start the Singapore Grand Prix from pole, with Nico Rosberg second and Daniel Ricciardo third
F1... for floodlit Singapore Grand Prix
New Articles
i100
Life and Style
Couples have been having sex less in 2014, according to a new survey
life
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.

iJobs Job Widget
iJobs Money & Business

Senior BA - Motor and Home Insurance

£400 - £450 Per Day: Clearwater People Solutions Ltd: **URGENT CONTRACT ROLE**...

Market Risk & Control Manager

Up to £100k or £450p/d: Saxton Leigh: My client is a leading commodities tradi...

SQL Developer - Watford/NW London - £320 - £330 p/d - 6 months

£320 - £330 per day: Ashdown Group: The Ashdown Group have been engaged by a l...

Head of Audit

To £75,000 + Pension + Benefits + Bonus: Saxton Leigh: My client is looking f...

Day In a Page

Scottish referendum: The Yes vote was the love that dared speak its name, but it was not to be

Despite the result, this is the end of the status quo

Boyd Tonkin on the fall-out from the Scottish referendum
Manolo Blahnik: The high priest of heels talks flats, Englishness, and why he loves Mary Beard

Manolo Blahnik: Flats, Englishness, and Mary Beard

The shoe designer who has been dubbed 'the patron saint of the stiletto'
The Beatles biographer reveals exclusive original manuscripts of some of the best pop songs ever written

Scrambled eggs and LSD

Behind The Beatles' lyrics - thanks to Hunter Davis's original manuscript copies
'Normcore' fashion: Blending in is the new standing out in latest catwalk non-trend

'Normcore': Blending in is the new standing out

Just when fashion was in grave danger of running out of trends, it only went and invented the non-trend. Rebecca Gonsalves investigates
Dance’s new leading ladies fight back: How female vocalists are now writing their own hits

New leading ladies of dance fight back

How female vocalists are now writing their own hits
Mystery of the Ground Zero wedding photo

A shot in the dark

Mystery of the wedding photo from Ground Zero
His life, the universe and everything

His life, the universe and everything

New biography sheds light on comic genius of Douglas Adams
Save us from small screen superheroes

Save us from small screen superheroes

Shows like Agents of S.H.I.E.L.D are little more than marketing tools
Reach for the skies

Reach for the skies

From pools to football pitches, rooftop living is looking up
These are the 12 best hotel spas in the UK

12 best hotel spas in the UK

Some hotels go all out on facilities; others stand out for the sheer quality of treatments
These Iranian-controlled Shia militias used to specialise in killing American soldiers. Now they are fighting Isis, backed up by US airstrikes

Widespread fear of Isis is producing strange bedfellows

Iranian-controlled Shia militias that used to kill American soldiers are now fighting Isis, helped by US airstrikes
Topshop goes part Athena poster, part last spring Prada

Topshop goes part Athena poster, part last spring Prada

Shoppers don't come to Topshop for the unique
How to make a Lego masterpiece

How to make a Lego masterpiece

Toy breaks out of the nursery and heads for the gallery
Meet the ‘Endies’ – city dwellers who are too poor to have fun

Meet the ‘Endies’ – city dwellers who are too poor to have fun

Urbanites are cursed with an acronym pointing to Employed but No Disposable Income or Savings
Paisley’s decision to make peace with IRA enemies might remind the Arabs of Sadat

Ian Paisley’s decision to make peace with his IRA enemies

His Save Ulster from Sodomy campaign would surely have been supported by many a Sunni imam