Thousands of Santander customers were facing a hike in mortgage costs today after the lender increased its standard variable rate by half a per cent.
October's rise to 4.74 per cent will impact a few hundred thousand people, although 2011's second biggest mortgage lender declined to give an exact figure.
Santander said its SVR mortgage holders will see an average increase of £26 a month or £312 a year for a £100,000 mortgage as a result of the change, which it expects will take effect from 3 October.
It is also increasing its SVR cap margin, which is the maximum above the Bank of England base rate it can charge, from 3.75 per cent to 4.99 per cent from 24 September.
Santander blamed the increased cost of funding a mortgage, adding that the cost of running a bank in the UK "has increased dramatically".
It comes as mortgage lenders generally have been tightening their borrowing criteria, leading to concerns that people will struggle to switch deals and some could find themselves trapped.
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, while the Bank of England base rate remains at a historic 0.5 per cent low.
An SVR is the default rate that mortgages tend to switch to once an initial fix or tracker deal period ends.
A Santander spokesman said: "This move is prompted by several factors - most notably the fact that for the last three years the amount it costs us to provide mortgages and the rates we offer our savings customers have been increasing despite the base rate remaining static.
"Indeed, for some time the correlation between base rate and mortgage and savings rates has been weakening.
"Additionally, the cost of running a bank in the UK has increased dramatically through a combination of increased liquidity, capital and funding requirements.
"Our competitors have increased their SVRs by similar amounts earlier this year, reflecting the same market dynamics, and while we were able to delay this decision through the first half, conditions now require us to follow them and move to adjust our rate."
He said that customers' individual circumstances will be considered in order to manage any impacts, although Santander believes its products should reflect the cost to the bank of providing them.
He said: "We believe the most successful UK retail banks in the future will provide this transparent, value-added and simple service and that our customers will demand it."
According to gross mortgage lending figures for 2011 from the Council of Mortgage Lenders (CML), Santander's share of the mortgage market was estimated at 16.8 per cent, putting it in second place to Lloyds Banking Group which had the biggest share at 19.9 per cent.
Rachel Springall, spokeswoman for consumer help website Moneyfacts, said: "While it is disappointing to see Santander increase its SVR by 0.5 percentage points, it is by no means the highest SVR on the market, which currently stands at 5.99 per cent.
"Customers concerned would be wise to contact their lender to calculate their new monthly repayments before the changes take effect."
The move comes after the Bank of England and the Treasury recently launched a "funding for lending" scheme to boost lending to businesses and households.
Some mortgage lenders have been slashing their rates in recent weeks but much of this has been aimed at people with larger amounts of equity, while the choice of lower deposit mortgages generally has dropped off sharply in recent months.
Analysts predicted that further SVR hikes from other lenders could be in the pipeline.
Adrian Anderson, director of broker Anderson Harris, said: "It is possible that other lenders will raise their SVRs if they haven't already.
"Borrowers should remain vigilant and check what their lender is charging."
He advised people who find themselves "mortgage prisoners", and unable to switch deals because they lack equity in their home or they no longer meet lenders' criteria, to try to use their savings to pay down their loans and improve their equity positions.
Which? chief executive Peter Vicary-Smith said: "This latest increase in mortgage interest rates is another blow to struggling households, many of whom are trapped on standard variable rates.
"The banks are profiting from these mortgage prisoners while giving better deals to new customers with low loan-to-value ratios.
"Over 1.2 million people have already seen rises in their SVR mortgage which will cost them over £300 million in the next year.
"The Government needs to explain why thousands of homeowners are still being hit by increases when the banks are supposed to be passing on cheaper credit through the Funding for Lending scheme."