Banks Increased Rates

by Mark Johnston

Banks have been accused of ripping off customers after raising interest rates despite the historic low base rate. Therefore critics have blasted the banks for being ‘unethical’ with their customers during the financial crunch.

Home owners on Halifax Standard Variable Rate (SVR) mortgages at 3.5% could be in for a rude shock, as the lender has decided to lift the Standard Variable Rate (SVR) cap. The worst hit borrowers would be those on interest only mortgages and letters have been sent out to customers to confirm the change in the cap.

Mark Harris, chief executive of broker SPF private clients, said “ it looks as though Halifax customers currently enjoying one of the cheapest Standard Variable Rate (SVR) will be soon paying more for their mortgages”.

The Halifax intends to increase the cap on its Standard Variable Rate (SVR) to 3.75% above the base rate for around 40,000 of their existing borrowers.

The increase comes in to force in April this year ad this rise would add around £735 per year to the cost of a £150,000 interest only mortgage.

It has been allowed to this as under the mortgage terms and conditions ,the cap can be raised with one months notice.

The increase comes in to force in April this year ad this rise would add around £735 per year to the cost of a £150,000 interest only mortgage.

Ray Boulger, of leading independent mortgage advisor John Charcol said “ Halifax is in a unique situation as far as its old Standard Variable Rate (SVR) cap which its mortgage conditions allow to be changed.

Customers affected by Halifax’s decision are those who have taken out deals between 2001 and 2007.

Financial experts believe “ customers who thought they were protected by a cap will be justifiably upset about this move, but it is sadly inevitable that the Halifax would want to improve margins on its Standard Variable Rate (SVR) because it is so low compared with some competitors.

Spokesperson for the Halifax stated “ we continually assess the many dynamic factors that impact mortgage pricing and have reviewed the cap level to ensure that it remains suitable in the current market conditions”.

The Latest Inter-Bank Lending Rate (LIBO) has risen dramatically from around 0.8% in August 2011 to 1.06% currently and banks are also being forced to hold more capital reserves to safeguard against collapse.

Therefore raising the Standard Variable Rate (SVR) for some borrowers would pull in a substantial extra sum for the Halifax and it would also reflect the rise in money market variable rate lending costs incurred by banks over the past year.

Bearing in mind the difficulties the Halifax had after the last change to cap in September 2008 when the Financial Services Authority (FSA) forced them to write to many of their Standard Variable Rate (SVR) customers and also pay compensation, they will have to be ultra careful to make sure everything is being done by the book this time.

The Royal Bank of Scotland has also increased their rates for its offset mortgage and one account customers by 0.25%.

The bank has estimated that around 200,000 of its customers will be affected by this increase. These customers will now be paying a new rate of 4% ,which is up from 3.75% previously.

A spokesperson for the Royal Bank of Scotland said “ it has to contend with increased finding costs over the past year and can no longer absorb the cost”.

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