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

Start your day with The Independent, sign up for daily news emails
News
people
Arts and Entertainment
Attenborough with the primates
tvWhy BBC producers didn't want to broadcast Sir David Attenborough's famed Rwandan encounter
Sport
Jonatahn Sexton scores a penalty
rugby
News
The dress can be seen in different colours
weird news
ebooks
ebooksA special investigation by Andy McSmith
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

SThree: HR Benefits Manager

£40000 - £50000 per annum + pro rata: SThree: SThree Group have been well esta...

Recruitment Genius: Office Manager / Financial Services

£30000 - £37000 per annum: Recruitment Genius: Established in 1999, a highly r...

Jemma Gent: Year End Accountant

£250-£300 Day Rate: Jemma Gent: Are you a qualified accountant with strong exp...

Jemma Gent: Management Accountant

£230 - £260 Day Rate: Jemma Gent: Do you want to stamp your footprint in histo...

Day In a Page

War with Isis: Fears that the looming battle for Mosul will unleash 'a million refugees'

The battle for Mosul will unleash 'a million refugees'

Aid agencies prepare for vast exodus following planned Iraqi offensive against the Isis-held city, reports Patrick Cockburn
Yvette Cooper: We can't lose the election. There's too much on the line

Yvette Cooper: We can't lose the election. There's too much on the line

The shadow Home Secretary on fighting radical Islam, protecting children, and why anyone in Labour who's thinking beyond May must 'sort themselves out'
A bad week for the Greens: Leader Natalie Bennett's 'car crash' radio interview is followed by Brighton council's failure to set a budget due to infighting

It's not easy being Green

After a bad week in which its leader had a public meltdown and its only city council couldn't agree on a budget vote, what next for the alternative party? It's over to Caroline Lucas to find out
Gorillas nearly missed: BBC producers didn't want to broadcast Sir David Attenborough's famed Rwandan encounter

Gorillas nearly missed

BBC producers didn't want to broadcast Sir David Attenborough's famed Rwandan encounter
Downton Abbey effect sees impoverished Italian nobles inspired to open their doors to paying guests for up to €650 a night

The Downton Abbey effect

Impoverished Italian nobles are opening their doors to paying guests, inspired by the TV drama
China's wild panda numbers have increased by 17% since 2003, new census reveals

China's wild panda numbers on the up

New census reveals 17% since 2003
Barbara Woodward: Britain's first female ambassador to China intends to forge strong links with the growing economic superpower

Our woman in Beijing builds a new relationship

Britain's first female ambassador to China intends to forge strong links with growing economic power
Courage is rare. True humility is even rarer. But the only British soldier to be awarded the Victoria Cross in Afghanistan has both

Courage is rare. True humility is even rarer

Beware of imitations, but the words of the soldier awarded the Victoria Cross were the real thing, says DJ Taylor
Alexander McQueen: The catwalk was a stage for the designer's astonishing and troubling vision

Alexander McQueen's astonishing vision

Ahead of a major retrospective, Alexander Fury talks to the collaborators who helped create the late designer's notorious spectacle
New BBC series savours half a century of food in Britain, from Vesta curries to nouvelle cuisine

Dinner through the decades

A new BBC series challenged Brandon Robshaw and his family to eat their way from the 1950s to the 1990s
Philippa Perry interview: The psychotherapist on McDonald's, fancy specs and meeting Grayson Perry on an evening course

Philippa Perry interview

The psychotherapist on McDonald's, fancy specs and meeting Grayson Perry on an evening course
Bill Granger recipes: Our chef recreates the exoticism of the Indonesian stir-fry

Bill Granger's Indonesian stir-fry recipes

Our chef was inspired by the south-east Asian cuisine he encountered as a teenager
Chelsea vs Tottenham: Harry Kane was at Wembley to see Spurs beat the Blues and win the Capital One Cup - now he's their great hope

Harry Kane interview

The striker was at Wembley to see Spurs beat the Blues and win the Capital One Cup - now he's their great hope
The Last Word: For the good of the game: why on earth don’t we leave Fifa?

Michael Calvin's Last Word

For the good of the game: why on earth don’t we leave Fifa?
HIV pill: Scientists hail discovery of 'game-changer' that cuts the risk of infection among gay men by 86%

Scientists hail daily pill that protects against HIV infection

Breakthrough in battle against global scourge – but will the NHS pay for it?